The prices of gold and silver edged down during the previous week. As the year is winding down, the clock is still ticking on the fiscal cliff. Up to now, the White House and Congress didn’t progress towards a viable plan to cut the deficit in this decade. Last week, several U.S related reports came out last week: U.S new home sales increased in November, U.S consumer confidence slipped in December; the U.S jobless claims declined by 12k to reach 350k. These news items may have adversely affected precious metals during the week. Moreover, the speculations that Paulson might cut his position in gold are contributing to the weakness of precious metals. Will gold and silver continue to fall? Here is a short forecast for December 31st to January 4th; this includes a fundamental analysis of the main report that may affect precious metals including: U.S manufacturing PMI, minutes of recent FOMC meeting, EU monetary development, Canada’s employment, Germany’s retail sales U.S non-farm payroll report, China’s manufacturing PMI, and U.S. jobless claims.
The price of gold declined during last week by 0.27%; moreover, during last week, the average rate reached $1,659.26 /t. oz which is 0.5% lower than the previous week’s average. Gold ended the week at $1,654.9 /t. oz.
Silver also declined during the previous week by 0.76%; moreover, the average rate also fell by 2.75% to $29.92/t oz compared to the previous week’s average.
The Euro slightly rose against the U.S dollar by 0.21% (on a weekly scale); conversely, other “risk” currencies such as the Australian dollar moderately depreciated against the U.S dollar by 0.22%. The correlations between leading currency pairs and precious metals have weakened during recent weeks: recent the correlation between Euro/USD and gold was only -0.03 and between AUD/USD and gold the correlation was also -0.07. These weak relations suggest the recent developments in the forex markets didn’t coincide with the changes in precious metals. These low correlations, however, might pick up starting the New Year as the trading volume will rise. Thus, if the Euro and other “risk” will further rise during the week, this may curb the downward trend of gold and silver.
In the video below there is a broad overview of the main reports that may affect gold and silver between December 31st and January 4th. These include the above-mentioned news items such as: U.S manufacturing PMI, minutes of recent FOMC meeting, EU monetary development, Canada’s employment, U.S non-farm payroll report, China’s manufacturing PMI, and U.S. jobless claims (just to name a few).
In conclusion, I guess gold and silver will continue to trade down during the first few days of 2013. As the year is winding down, the fiscal cliff debate is coming to its conclusion. The recent news is that Obama is still optimistic and determined in reaching an agreement with Congress. For now, it seems that the markets priced the scenario in which U.S officials won’t reach an agreement to avoid this fiscal cliff. Therefore, if the White House and Congress will be able to agree on the way of cutting the multi year budget deficit by Monday, this might lead to a sudden rally in commodities prices. The low trading volume is likely to continue until Thursday.. The FOMC decision to expand QE3 didn’t affect up to now precious metals prices. The upcoming minutes of the recent decision could shed some light on the future steps of the FOMC. The upcoming reports regarding the U.S economy including: non-farm payroll report, manufacturing PMI, non- manufacturing PMI and jobless claims, could affect the USD and precious metals prices: if these reports will show growth in the U.S economy, they could pull down the prices of gold and silver. If the Indian Rupee will further appreciate against the USD, as it did during the previous week, it may pull up 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 further appreciate against the USD, they could curb the decline of precious metals.
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