Gold and Silver Prices Outlook for January 28 – February 1

The prices of precious metals shifted gear again and this time declined last week along with the decrease of certain currencies against the USD such as Canadian dollar, yen and Aussie dollar. The recent news of the hike in the imposed tax on gold imports in India may have contributed to the expectations the demand for gold in this country will fall. In the U.S several reports came out and showed the U.S economy is progressing: the manufacturing PMI in January increased; number of jobless claims declined last week. These news items may have also pulled down precious metals. The decision of BOC to leave the rate unchanged and lower the expected GDP growth rate in 2013 may have pulled down not only the Canadian dollar but also precious metals.  Will gold and silver change direction and bounce back next week? Here is a short outlook for January 28th to February 1st; this includes a fundamental analysis of the main report and events that may influence bullion traders including: U.S non-farm payroll report, FOMC meeting, Euro-Area monetary developments, Germany’s retail sales, U.S GDP for Q4, China and U.S’s manufacturing PMI, Canada’s GDP, U.S core durable goods, GB manufacturing PMI, and U.S. jobless claims.

Gold fell during last week by 1.8%; moreover, during said week, the average rate reached $1,678.68 /t. oz which is 0.25% below the previous week’s average. Gold ended the week at $1,656 /t. oz.

Silver also declined during the previous week by 2.32%; conversely, the average rate increased by 1% to reach $31.88/t oz compared to last week’s.

The Euro rose against the U.S dollar by 1.1% (on a weekly scale); conversely, other “risk” currencies such as the Australian dollar and Canadian dollar depreciated against the U.S dollar by 0.82% and 1.42%, respectively. The correlations between leading currency pairs and precious metals have strengthened in recent days: during December and January the correlation between USD/CAD and gold was -0.28 and between Australian dollar /USD and gold the correlation was stronger at 0.43. These correlations suggest the recent developments in the forex markets may have had a moderate effect on the shifts in precious metals. These correlations might strengthen in the coming weeks. Thus, if the Euro and other “risk” will depreciate again 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 28th and February 1st. These include the above-mentioned news items such as: U.S non-farm payroll report, FOMC meeting, Euro-Area monetary developments, Germany’s retail sales, U.S GDP for Q4, China and U.S’s manufacturing PMI, Canada’s GDP, U.S core durable goods, GB manufacturing PMI, and U.S. jobless claims (just to name a few).

In conclusion, I guess gold and silver might resume their downward trend during the week. The upcoming FOMC meeting isn’t likely to result in any earth shattering resolutions. Moreover, The Fed might only further talk about its future exit strategy from the current $85 billion a month purchase program. In such a case, this news might bring down the prices of gold and silver. The Fed’s budget has recently passed the $3 trillion threshold. So the concerns many investors might have regarding the current monetary policy are likely to keep gold and silver from tumbling down. In the coming weeks, the debt ceiling debates among U.S policymakers are likely to take another step forward; thus, unless policymakers won’t reach an agreement, this situation could help rally precious metals in the coming weeks. The upcoming reports regarding the U.S economy including: non-farm payroll report, core durable goods, manufacturing PMI and jobless claims, could affect the USD and precious metals rates: if these reports will show growth in the U.S economy, they may adversely affect the rates of gold and silver. Alternatively, the upcoming report regarding China’s manufacturing PMI could give an upward push to commodities if the PMI will increase. China is among the lading importers of gold in recent years, and if its economy will continue to rise, it could suggest a growing demand for gold. The recent decision of India’s government to hike the import taxes on gold is likely to keep pulling down the demand for gold in this nation. On the other hand, if the Indian Rupee will continue to strengthen against the USD, as it did in recent weeks, it may positively affect 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 depreciate against the USD, they could also adversely affect precious metals.

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