The prices of gold and silver continued their downward trend throughout most of last week. The concerns regarding the fiscal cliff is among the reasons the FOMC decided to expand QE3 by purchasing long term treasuries securities at a pace of $45 billion per month starting January. Except for this announcement, other news items didn’t seem to have a substantial effect on bullion. Last week, several U.S reports were published. These reports include: U.S PPI fell by 0.8% mainly due to the decline in energy rates; the U.S jobless claims declined again by 29k to reach 343k; finally, the CPI also fell by 0.3%. These news items may have adversely affected precious metals during the week, although precious metals remained virtually unchanged during most of the week. Will gold and silver continue to fall? Here is a short forecast for December 17th to 21st; this includes a fundamental analysis of the main publications that may affect precious metals including: U.S core durable goods, Canada’s GDP, Japan’s trade balance, U.S housing starts, Bank of Japan’s monetary meeting, Philly Fed index,, and U.S. jobless claims.
Gold price declined during last week by 0.55%; moreover, during last week, the average rate reached $1,705.88 /t. oz which is 0.2% higher than the previous week’s average. Gold ended the week at $1,695.2 /t. oz.
Silver declined during last week by 2.34%; the average rate also decreased by 0.55% to reach $32.92/t oz.
The Euro rallied against the U.S dollar by 1.83% (on a weekly scale); further, other “risk” currencies such as the Australian dollar also appreciated against the U.S dollar by 0.74%. The correlation between the Euro/USD and precious metals has further weakened during last week and is now mid-weak and positive: during recent weeks the correlation between Euro/USD and gold reached only 0.12 and between AUD/USD and gold the correlation was also 0.11. Nonetheless, if the Euro and other “risk” will continue to rise during the week, this may contribute to the rise of gold and silver.
In the video below there is a broad overview of the main publications, speeches and events that may affect gold and silver prices between December 17th and December 21st. These include the above-mentioned news items such as: FOMC meeting, EU Summit, BOE Governor’s speech, U.S trade balance report, China’s new loans, U.S retail sales, Japan’s GDP for Q3, U.S CPI and PPI, Canada’s trade balance, and U.S. jobless claims (just to name a few).
In conclusion, I guess gold and silver will continue their downward during the rest of the week. Moreover, the volatility might further shrink during the week as the year winds down. The recent FOMC decision to expand QE3 had a very short positive effect on precious metals prices. Moreover, this decision didn’t curb the downward trend of precious metals during most of the week. This could mean that for the rest of the month gold and silver will continue to slowly dwindle. The upcoming reports regarding the U.S economy including: housing starts, core durable goods, last estimate of GDP and jobless claims, could affect the USD and commodities prices: if these reports will show an ongoing growth in the U.S economy, they could help rally commodities prices. The upcoming publication of Canada’s GDP and durable goods report could affect major commodities via its local currency. The same goes for the publication of the Japan’s trade balance and BOJ monetary policy meeting. If the Indian Rupee will depreciate against the USD, as it did during recent weeks, it may pull back the demand for gold in India, among the leading consumers of gold. Finally, if the Euro, Aussie dollar, Canadian dollar and other risk currencies will continue to appreciate against the USD, they could curb the downward trend of precious metals.
For further reading: