Gold and silver continued to trade down during last week. Their sharp fall coincided with the depreciation of leading “risk related currencies” such as Euro and Aussie dollar against the USD. Moreover, the ongoing rally of U.S equity markets is also contributing the decline in demand for bullion as an investment. Last week, U.S retail sales edged up by 0.1% during April. On the other hand, Philly Fed index fell in May; housing starts sharply fell by 16.5% in April; jobless claims sharply increased by 32k to reach 360k; the PPI fell again by 0.7% during last month. Will gold and silver continue to trade down this forthcoming week? Here is a short outlook for May 20th to May 24th; this includes a fundamental analysis of the main reports, publications and speeches that may affect bullion markets. These include: minutes of the FOMC meeting, Bernanke’s testimony, U.S core durable goods, ECB President’s speech, China’s manufacturing PMI, U.S existing home sales, German climate survey, Canada’s retail sales, U.S new home sales, and U.S. jobless claims.
The price of gold sharply fell down during the previous week by 5%; moreover, during last week, the average weekly price reached $1,401.32 /t. oz which was 3.96% below last week’s average. Gold ended the week at $1,364.7 /t. oz.
Silver plummeted during last week by 5.5%; moreover, the average weekly rate decreased by 3.76% to reach $22.94/t oz compared to last week’s average.
Herein is a short overview that outlines the main reports, speeches and decisions that may affect gold and silver next week between May 20th and May 24th
Based on upcoming events and the ongoing market sentiment, the prices of precious metals might continue to trade down during the week. The main events of the week will revolve again around the upcoming minutes of the FOMC meeting and Bernanke’s testimony in Congress. If the Fed will tip its hand regarding the future steps it will take vis-à-vis the FOMC’s monetary policy, i.e. whether the Fed will cut its QE3 program in the near future; precious metals might further drop in the coming weeks. Moreover, if the market volatility in gold and silver prices will rise again, the CME might decide to augment its cash requirements on precious metals contracts. This could further drag down precious metals prices, as was the case back in mid-April. If the minutes of the FOMC meeting won’t reveal any new information on these issues, the effect this report will have on gold and silver won’t be significant. I think the speculations around the Fed cutting its asset purchase program are premature considering the U.S economy isn’t out of the woods just yet: The inflation is still below 2%, the economic growth is low, and the unemployment is still high. Moreover, considering the budget cuts the government has implemented with the sequester and the future plans of U.S policymakers to cut the deficit even further, the Fed is the only institute that is trying to jump-start the U.S economy. On the other hand, the Fed is concerned about the exit strategy and it seems that the QE program has diminishing effect compared to the previous QE programs. In the U.S several reports will come out next week including: core durable goods, jobless claims, and new and existing home sales. If these reports will show signs of recovery, they could drag down precious metal prices. If the U.S equity market will continue to rally, this could steer away investors from precious metals and into stocks.
If the upcoming financial reports including: China’s trade balance, Germany’s climate survey, GB GDP, EU flash manufacturing PMI, Canada’s retail sales, and China’s manufacturing PMI won’t show signs of improvement, they could pull down gold and silver.
The SPDR gold trust ETF holdings keeps losing clients: the ETF’s amount of gold held declined by 3.4% since the beginning of May and by 23.13% since the beginning of 2013. If gold holdings will continue to dwindle, they could indicate the demand for gold as an investment continues to fall. The sharp depreciation of the Euro and Aussie dollar during the previous week may have also partly contributed to the decline of bullion prices. If these currencies will continue to depreciate against the USD, they might pressure down precious metals. Finally, the Indian Rupee slightly appreciated against the USD last week; if this trend will continue, as it did during last week; it may positively affect the demand of gold in India.