The prices of precious metals spiked on Thursday along with the rest of the market including crude oil, stocks and Euro. The recent ECB meeting and press conference that followed may have contributed to this rally. But the following day, gold and silver shifted gear and declined. Despite this zigzag the prices of gold and silver slightly increased on a weekly scale. Several reports were published last week and may have affected precious metals: China’s trade balance report showed a rise in exports during December; the U.S jobless claims rose by 4k to reach 371k. The report on China may have helped rally commodities prices; the jobless claims may have pulled down the USD. Will gold and silver change direction and fall next week? Here is a short outlook for January 14th to January 18th; this includes a fundamental analysis of the main report and events that may affect precious metals including: U.S CPI, Bernanke’s speech, Canada’s manufacturing sales, Philly Fed survey, U.S PPI, , China’s GDP for the fourth quarter, Australia’s employment report, U.S retail sales, Spain’s bond auction, and U.S. jobless claims.
Gold increased during last week by 0.71%; alternatively, during said week, the average rate reached $1,660.52 /t. oz which is 0.47% below the previous week’s average rate. Gold ended the week at $1,660.6 /t. oz.
Silver also rose during last week by 1.55%; moreover, the average rate also increased by 0.18% to reach $30.40/t oz compared to last week’s average.
The Euro also hiked against the U.S dollar by 2.1% (on a weekly scale); moreover, other “risk” currencies such as the Australian dollar also appreciated against the U.S dollar by 0.52%. The correlations between leading currency pairs and precious metals remind weak in recent weeks: during December and January the correlation between Euro/USD and gold was only 0.07 and between Australian dollar /USD and gold the correlation was also 0.27. These weak relations suggest the recent developments in the forex markets may have had at best a modest effect on the shifts in precious metals. These low correlations, however, might strengthen in the weeks to follow. Thus, if the Euro and other “risk” will depreciate during the week, this might pull down gold and silver.
In the video below there is a broad overview of the main reports and events that may affect gold and silver between January 14th and January 18th. These include the above-mentioned news items such as: U.S CPI, Bernanke’s speech, Philly Fed survey, U.S PPI, , China’s GDP for the fourth quarter, U.S retail sales, Spain’s bond auction, and U.S. jobless claims (just to name a few).
In conclusion, I guess gold and silver will change pace and resume its downward trend. The rise in trading volume is likely to lower the price volatility of gold and silver. The upcoming speech by Bernanke could strongly affect gold and silver. If he will hint the Fed is starting to plan its exit strategy from the whole QE programs, this could adversely affect precious metals. The uncertainty around future steps U.S policymakers will take with respect to the spending cuts and raising the debt ceiling might help rally precious metals in the following weeks. If China’s economy will expand by a higher than expected rate, according to the fourth quarter GDP report, this could positively affect commodities prices. The upcoming reports regarding the U.S economy including: Philly Fed index, housing starts, PPI, CPI, retail sales and jobless claims, could affect the USD and bullion rates: if these reports will present progress in the U.S economy, they could adversely affect the prices of gold and silver. If the Indian Rupee will continue to appreciate against the USD, as it did last 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 change pace and depreciate against the USD, they could also adversely affect precious metals.
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