Gold and Silver Prices Outlook for November 2013

The precious metals market hasn’t moved much and gold and silver prices remained nearly unchanged on a monthly scale. The FOMC meeting ended with no change in policy. But some analysts think the FOMC has left the door open on tapering QE3 in December. The upcoming minutes of the FOMC meeting could offer some clarifications regarding tapering QE3. Looking forward, will gold and silver resume their upward trend in November? Let’s breakdown the forthcoming events, decisions and publications that may affect the bullion market, which will unfold during November; let’s also provide a short analysis for October.                                       

Gold and Silver for October 2013

Gold and silver prices moderately moved during October. Their little movement coincided with the developments of the Euro and Japanese yen against the USD. By the end of October, the price of gold decreased by 0.24%. The price of silver rose by 0.68%.

Let’s divide October into two parts: the table below divides the month at October 15th. I divide the month to demonstrate the shift in pace of gold and silver prices; during the first part of October, gold fell by 4.1%; silver, by 2.4%. During the second part of October, however, gold rose by 4%; silver price, by 3.2%.

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Gold and Silver dollar euro percent change  October 2013

During the first part of October, the U.S dollar depreciated against the Euro, Japanese yen and Aussie dollar; the Euro/USD and USD/Yen currency pairs are usually strongly correlated with gold and silver. During the second part of the month, the Aussie dollar and Japanese yen slightly depreciated against the US dollar.

The chart below shows the changes of gold and silver during October, in which the prices are normalized to 100 on September 30th 2013.

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Gold and silver forecast November 2013

The ratio of gold to silver (gold price/silver price) slightly fell during the month. The ratio decreased as silver price has out-performed gold price. During the month the ratio ranged between 59 and 61.

Here are several factors that may have adversely affected gold and silver prices during the month:

  1. The rekindled speculations around the FOMC tapering QE3 in December;
  2. The depreciation of several currencies such as Canadian dollar and Aussie dollar against the USD during the second part of October may have curbed the rally of gold and silver prices;
  3. The ongoing decline in U.S jobless claims during October;
  4. The depreciation of the Indian Rupee may have dragged the demand for gold in India, among the leading importers of gold;
  5. The potential drop in India’s gold imports;
  6. The recovery of  U.S equity markets that serve as an alternative investment for gold and silver; 

Here are several factors that may have positively affected gold and silver during October:

  1. Several U.S reports showed little progress: Manufacturing PMI slightly increased again to 56.4; retail sales inched down by 0.1% during October; Philly Fed index slipped during October. These reports suggest the U.S economy isn’t progressing any faster and thus may have pulled up precious metals;
  2. The decision of the FOMC to leave its policy unchanged and not to taper QE3 at this point;
  3. The appreciation of several currencies such as Euro and Aussie dollar against the USD during the first part of October may have curbed down the decline of gold and silver prices;
  4. The decision of BOE, BOC, RBA and ECB to keep their respective cash rate unchanged in October;
  5. According to the recent U.S non-farm payroll report, only 148k jobs were added – this was lower than estimated any may have positively affected gold and silver prices;
  6. The pledge of the FOMC to keep its low rates until mid 2015;

The FOMC minutes at the end of the month may affect the financial markets: If the minutes reveal that more FOMC members are reconsidering tapering QE3 or hinting to that effect by the end of 2013, this could result in gold and silver further declining. My guess, however, the FOMC won’t taper its asset purchase program in 2013. In such a case, precious metals might bounce back from the recent fall at the end of October. In the meantime, the upcoming U.S data on manufacturing, services and labor markets will offer insight behind the progress of the U.S economy. If the upcoming reports show little signs of growth, they might persuade FOMC members to keep QE3 at its current pace in the near future, which will slightly pressure up precious metals prices. Conversely, if U.S equities continue to recover, it is likely to weaken the demand for gold and silver as alternative investments. In Europe, if Euro continues to rally, it may also slightly and positively affect gold and silver prices. The decline in demand for GLD ETF signals the demand for gold as an investment may be falling. Finally, if the demand for precious metals in China and India rally, this could positively affect the bullion market.

In conclusion, I remain neutral regarding the progress of gold and silver prices. Gold and silver are likely to move in an unclear trend as they did during last month. Nevertheless, if U.S economy shows little signs of progress, if the USD resumes its rally and if the Asian market strengthens, precious metals may slightly recover from their fall from the end of October. 

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