The prices of gold and silver changed direction and sharply fell during last week. Despite their fall, during the week they have zigzagged with an unclear trend. During last week, several reports were released during the week that could influence FOMC members. Many investors were looking at the progress of the U.S economy and how these reports may affect FOMC members in anticipation for the FOMC meeting to be held during December 17-18. The main reports that were published last week were: The third quarter GDP growth rate was revised up to 3.6%; jobless claims declined again by 23k to reach 298k; new home sales jumped by 25% during October; manufacturing PMI rose again to 57.3. Finally, NF payroll report showed 203k jobs were added during last month – inline with expectations. All these reports suggest the U.S economy is recovering. Will gold and silver prices tumble further? Here is a short outlook for December 9th to December 13th including: U.S retail sales, Draghi’s speech, U.S PPI, China’s CPI, German and French industrial production, Japan’s third quarter GDP, U.S federal budget, FOMC member Bullard speaks, EU group and ECOFIN Summits, Australia’s employment update, and U.S. jobless claims.
The price of gold declined by 1.67% last week; moreover, the average price reached $1,230.62 /t. oz which was 0.9% lower than last week’s average rate. Gold ended the week at $1,229.60 /t. oz. Silver price fell by 2.6%; further, the average weekly rate was $19.42/t oz, which was 1.51% below last week’s.
Herein is a short overview showing the main reports and events that will come to fruition during December 9th and December 13th and may affect precious metals prices.
Let’s breakdown the main events of reports by leading economies:
Following the sharp rise in gold and silver prices’ volatility, this week might return to be slow paced. Last week’s many and important U.S reports may have affected the USD and commodities prices. This week only a few reports will be released including: Retail sales, federal budget update, producer price index, and jobless claims; they could have some moderate effect on USD and precious metals prices. FOMC member Bullard will give a speech; it might also influence precious metals investors in anticipation for the upcoming FOMC meeting, which will be held between December 17 and 18.
The Euro rallied against the USD during last week. Its rally was despite the little to no movement of other currencies such as Aussie dollar and Japanese yen. The moderate rise of the Euro didn’t seem to positively coincide with the decline of gold and silver prices. Next week, several events and reports will take place including: EU group summit, Draghi’s speech, French and German industrial production, and ECB Monthly Bulletin. The upcoming reports could affect the Euro/ USD, and, in turn, may also affect gold and silver. The linear correlation between Euro/USD and gold price fell to 0.38 during November/December – a positive and mid-strong correlation.
India and China
During the upcoming week, several Chinese reports will be released including new loans, CPI, and industrial production. These reports could indicate if the Chinese economy has improved. If China’s economy has improved, it could suggest the demand for commodities including gold and silver is strengthening.
In India, the Indian Rupee sharply appreciated against the USD during the previous week. This trend could improve the gold and silver prices in India and positively affect the demand for precious metals. Conversely, the higher import taxes could keep curbing down the growth in demand for precious metals.
Finally, gold holdings of SPDR gold trust ETF fell again by 0.89% last week. The ETF was also down by 38.13% for the year (up-to-date). Current gold holdings are at 835.705 tons. If the ETF’s gold holdings continue to decrease, this may signal the demand for gold as an investment is diminishing.
In conclusion, this week is likely to be less volatile than the previous one. The upcoming U.S reports aren’t likely to stir up the market and investors will continue to look for hints as the Fed’s next move. The following week the FOMC will convene for the last time in 2013. The market might slow down this week and remained poised until then. Therefore, I’m neutral on gold and silver for this week.
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