Despite the high volatility in the prices of gold and silver during last week, they remained nearly unchanged on a weekly scale. Gold and silver rallied after the holiday after the announcement that the U.S Senate and later Congress approved the tax hikes on wealthy households. By doing so, the U.S policymakers averted the fiscal cliff. The U.S officials will still have financials matters to tackle by February, including raising the debt ceiling, and spending cuts. On the other hand, the release of the minutes of the December FOMC meeting raised the speculations that the Fed might discontinue in the near future its asset purchase program. This report may have fueled the sharp drop in the prices of precious metals by the end of the week. Several U.S related reports were published during last week and may have also affected gold and silver: U.S non-farm payroll rose in December by 155k; the U.S jobless claims rose by 10k to reach 362k. Will gold and silver resume their downward trend? Here is a short outlook for January 7th to January 11th; this includes a fundamental analysis of the main report and events that may affect bullion including: U.S trade balance, ECB rate decision, EU unemployment rate, Canada’s trade balance, China’s new loans, Germany’s factory orders, Japan’s current accounts, China’s trade balance, and U.S. jobless claims.
Gold slipped during last week by 0.36%; alternatively, during said week, the average rate reached $1,668.4 /t. oz which is 0.55% above the previous week’s average. Gold ended the week at $1,648.9 /t. oz.
The price of silver declined during last week by 0.01%; moreover, the average rate also increased by 0.88% to reach $30.34/t oz compared to last week’s average rate.
The Euro fell against the U.S dollar by 1.11% (on a weekly scale); conversely, other “risk” currencies such as the Australian dollar appreciated against the U.S dollar by 1.03%. The correlations between leading currency pairs and precious metals remind weak in recent weeks: recent the correlation between Euro/USD and gold was only -0.12 and between USD/CAD and gold the correlation was also -0.21. These weak relations suggest the recent changes in the forex markets didn’t coincide with the shifts in precious metals. These low correlations, however, might pick up in the weeks to follow. Thus, if the Euro and other “risk” will dwindle during the week, this might contribute to 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 January 7th and January 11th. These include the above-mentioned news items such as: U.S trade balance, ECB rate decision, EU unemployment rate, Canada’s trade balance, China’s new loans, Germany’s factory orders, Japan’s current accounts, China’s trade balance, and U.S. jobless claims (just to name a few).
In conclusion, I guess gold and silver will resume their downward trend during the second week of 2013. Alternatively, the uncertainty around future steps of U.S policymakers in dealing with the spending cuts and raising the debt ceiling might help rally precious metals in the weeks to come. The rise in trading volume is likely to continue as we are exiting the holiday season. This could lower the volatility of precious metals. The minutes of the recent FOMC meeting could keep holding back gold and silver from rising until the next FOMC meeting will be held at the end of January. The upcoming reports regarding the U.S economy including: trade balance and jobless claims, could affect the USD and precious metals prices: if these reports will show progress in the U.S economy, they could adversely affect the prices of gold and silver. China’s reports including new loans and trade balance could offer some insight about the progress of this economy. If these reports will show no growth, they could pull down the prices of commodities including gold and silver. If the Indian Rupee will continue to depreciate against the USD, as it did during last week, it may pull down 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 contribute to the decline of precious metals.
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