Gold and silver slightly rose during last week. Their rally coincided with the recovery of other commodities such as oil and leading “risk related currencies” such as Euro and Aussie dollar against the USD. Last week, the FOMC and ECB decided on any changes to their respective monetary policy. The ECB decided to cut its interest rate by 0.25pp to 0.5%. The FOMC kept its policy unchanged including its $85 billion a month asset purchase program. Nonetheless, the speculation around the next move of the Fed may have pulled bullion rates into different directions. The recent non-farm payroll report didn’t seem to stir up much bullion market despite its better than expected gain in employment. Will gold and silver continue to recover this upcoming week? Here is a short outlook for May 6th to May 10th; this includes a fundamental analysis of the main reports, publications and speeches that may affect bullion markets. These include: Bernanke’s speech, Chin’s CPI, Canada’s employment report, ECB President Speaks GB, manufacturing conditions, G7 Summit, BOE and RBA rate decisions, China’s trade balance, and U.S. jobless claims.
Gold increased during last week by 0.73%; moreover, during the week, the average weekly price reached $1,463.52 /t. oz which was 2.08% above last week’s average. Gold ended the week at $1,464 /t. oz.
Silver rallied last week by 0.99%; the average weekly rate rose by 2.16% to $23.88/t oz compared to last week’s average.
Herein is a short overview that outlines the main reports, speeches and events that may affect gold and silver next week between May 6th and May 10th.
Based on above and latest changes in the gold and silver markets, the prices of precious metals might continue to rise during the week and thus continue this recent correction. I still think that precious metals will resume their downward trend in the following weeks. If the upcoming financial reports including: China’s trade balance, Germany’s factory orders, Australia’s trade balance, and Canada’s employment report will show signs of growth, they could pull up gold and silver. If the RBA or BOE decide to cut their respective rates this could adversely affect their respective currency, and by extension also pull down commodities prices.
The recent FOMC meeting didn’t result in any big announcement as the policy remained unchanged.
The table below shows the bullion market reaction to the news regarding the FOMC meeting in 2012 and 2013.
As indicated above, the recent meetings may have stir up bullion rates but eventually didn’t change prices course. Perhaps the minutes of the FOMC meeting, which will be published on May 22nd, could shed some light on the future steps of the FOMC and thus affect the direction of bullion rates. Until then, Bernanke’s speech might stir up the markets if he will offer any hints regarding the next move of the Fed. The same goes for Draghi’s upcoming speech.
The SPDR gold trust ETF holdings continue to fall: the ETF’s amount of gold held tumbled down by 15.3% since the beginning of March. If the holdings will continue to dwindle, they could indicate the demand for gold as an investment will keep falling. The CME’s decision on April 15th to raise the requirements for cash deposits on gold and silver contracts is likely to keep fueling the decline in demand for bullion for investment. The recovery of the Euro and Aussie dollar during last week may have also partly contributed to the rally of commodities prices. If these currencies will continue to appreciate against the USD, they might also pressure up precious metals. Finally, the Indian Rupee sharply appreciated against the USD last week; if this trend will persist, as it did during the previous week; it may positively affect the demand of gold in India.