The prices of gold and silver slightly decreased again during last week. Cyprus’s bailout news may have contributed to the depreciation of the Euro but didn’t pull up safe haven investments such as gold. Will precious metals continue to decline this week? As I have pointed out in the latest precious metals weekly outlook, several reports, speeches and decisions may affect precious metals prices. These items include: U.S non-farm payroll report, ECB rate decision, Bernanke’s speech, U.S and Canada’s trade balance updates, Australia retail sales report, monetary policy meetings of Reserve Bank of Australia, Bank of England and Bank of Japan, U.S. factory orders, and U.S. jobless claims. On today’s agenda: China Manufacturing PMI and U.S. manufacturing PMI.
On Thursday, the price of gold declined by 0.71% to $1,594.8; Silver also decreased by 1% to $28.29. During March, gold rose by 1.08%; silver slipped by 0.36%. Moreover, during the previous week, the SPDR Gold Shares (GLD) slightly decreased by 0.69% and reached 154.47 by March 28th.
In the chart below are the normalized prices of gold and silver between January and March (normalized to 100 as of December 31st). The prices of gold and silver slightly declined in the past couple of weeks.
On Today’s Agenda
China Manufacturing PMI: According the previous update for February, the Manufacturing PMI inched down to 50.1; this means that China’s manufacturing sector is growing at a slower pace. If in the upcoming update the PMI will decline below the 50 point mark, it could signal deterioration in China’s economy. In such a case, this may adversely affect precious metals prices;
U.S. Manufacturing PMI: During February 2013, the index increased to 54.2%; this means the manufacturing is growing at a faster rate; this index may affect precious metals markets.
Currencies / Bullion Market – April Update
The Euro/ USD bounced back on Friday by 0.28% to 1.2816. During last week, the Euro/USD decreased by 1.33%. Moreover, several other currencies such as the Aussie dollar depreciated during last week against the U.S. dollar by 0.32%. The Japanese yen and Canadian dollar slightly appreciated against the USD last week by 0.31% and 0.68%, respectively. The mixed trend in major currencies against the U.S. dollar may have contributed to the moderate decline of gold and silver prices. The correlations among gold, Japanese yen and Aussie dollar remained weak during March: the linear correlation between gold and USD/Yen was -0.25 (daily percent changes); the linear correlation between the gold and AUD/USD was 0.12 (daily percent changes). These weak correlations suggest the recent changes in precious metals markets had little to do with the daily shifts in the foreign exchange markets.
Gold and silver slightly declined during last week. The recent developments in Cyprus didn’t seem to stir up the precious metals markets and mostly contributed to the depreciation of the Euro. The recent news is that uninsured accounts in Cyprus will get a 60% haircut. Today’s reports include U.S. and China manufacturing PMI updates. These reports might affect the direction of gold and silver prices. If the U.S. PMI index will rise again, this could pull down the prices of gold and silver. This week, several reports in the U.S. will come out including: non-farm payroll update, factory orders, and jobless claims. These reports could affect not only the U.S. dollar but also gold and silver rates. If the U.S. economy will continue to show signs of recovery, it could strengthen the USD and thus pull down precious metals prices. Bernanke’s upcoming speech might affect precious metals traders only if he will provide a big headline regarding the FOMC’s monetary policy. This scenario, however, is less likely, in my opinion. Finally, if GLD’s gold holdings will continue to decline, this could serve as another indication for the decline in demand for precious metals.