Gold and silver slowly declined during last week only to bounce back on Friday soon after the U.S non-farm payroll report showed a 288k gain in jobs; the unemployment dropped to 6.3%. The FOMC decided earlier last week to taper QE3 by $10 billion to $45 billion a month. This news slightly dragged down the prices of gold and silver. The U.S GDP growth rate for the first quarter of 2014 – it showed a modest growth rate of only 0.1%; this news may have pulled down commodities prices. Finally, jobless clams rose by 14k to reach 344k as of last week. For the week of May 5th to May 9th, several reports and decisions will take place including: ECB rate decision, U.S JOLTS Job Openings, Janet Yellen testifies, U.S non-manufacturing PMI, BOE and RBA rate decisions, U.S, Australia, China and Canada’s trade balance reports, China new loans, and EU retail sales.
The price of gold edged up by 0.18% last week; moreover, the average price reached $1,295.44/t. oz which was 0.52% above than last week’s average rate. Gold ended the week at $1,302.9 /t. oz.
The price of silver slightly fell by 0.87%; further, the average weekly rate was $19.36/t oz, which was 0.76% below last week’s rate $19.67/t oz.
Herein is a short overview showing the main decisions, reports and events that will come to fruition during May 5th to 9th and may affect the bullion market.
Let’s breakdown the main events, speeches and reports by leading economies:
U.S
Last week’s FOMC decision didn’t have a strong adverse effect on precious metals. The FOMC tapered again its asset purchase program to $45 billion. Such a decision had, in the past, a negative impact on gold and silver as indicated in the table below.
As you can see, the recent decision also pressured downs the prices of gold and silver.
But the latest NF payroll report pulled back up the prices of gold and silver, even though 288 jobs were added during April.
This week, the U.S will keep issuing additional reports indicating the progress of the economy. Notably, JOLTS Job Openings, weekly update on jobless claims, trade balance, and non-manufacturing PMI. If these reports further assert the U.S economy is progressing about the market’s expectations this could bring down the prices of gold and silver. Moreover, the Chair of the FOMC, Janet Yellen, will go the Hill and testify on Wednesday, May 7th, before the Committee on the Budget. The title of her testimony is “The Economic Outlook”. This testimony could stir up the market if she surprises the markets with her remarks regarding the FOMC’s monetary policy.
During the previous week, the U.S dollar slightly depreciated against several currencies including the Euro and Canadian dollar; this may have also slightly pushed up gold and silver prices. If the U.S dollar further drops against leading currencies; this could further pressure up gold and silver. This week there are three rate decisions for RBA, BOE and ECB, which could also play a role in the forex markets.
Europe
This week the ECB will decide on its cash and deposit rate. If the ECB were to surprise the markets and cut down its cash or deposit rate or even hint to that effect in the coming meetings, this could adversely affect the Euro.
Further, several reports will be released during the week including: EU economic outlook, German factory orders, EU retail sales, German industrial production, Great Britain service PMI, and France’s industrial production. These reports could affect the Euro and British pound, which could partly affect the gold and silver.
India and China
During the previous week, the Indian Rupee rallied against the US dollar. If the rupee continues to appreciate, it could increase the demand for gold and silver in India.
In China, the final HSBC manufacturing PMI of 2014 will be released this week; it could shed some light on China’s growth. Several reports will also be released including CPI, new loans and trade balance. These reports could indicate of potential changes in the demand for gold and silver in China.
Finally, during last week, gold holdings of SPDR gold trust ETF dropped by nearly 1%. The ETF is also down by 2.3% since the beginning 2014. Gold holdings were at 782.852 tons by the end of last week. If the ETF’s gold holdings keep falling, this may signal the demand for gold as an investment is softening.
Takeaway
The main events of the week will revolve around the ECB’s rate decision, which could be the one in which the ECB president will announce of another rate cut – the first one for this year. Moreover, in the U.S, besides the regular monthly and weekly reports about the progress of the economy the testimony of Yellen in the Senate could also affect the direction of precious metals and the U.S dollar. The rest rally of gold and silver on Friday might soon change direction and they could resume their slow downward trend of recent weeks. Further, the ongoing descent in demand for gold ETFs suggests more investors are exiting the gold market. Based on the upcoming news and recent developments, I guess gold and silver may change direction and slowly decline this week. In any case, the volatility of gold and silver is likely to fall again.
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