During the beginning of the week gold and silver rallied only to tumble downon Friday. In Europe, ECB and BOEkept its cash rate unchanged. This news may have contributed to the rally of not only the Euro but also PM prices. In Friday, U.S employment report showed a higher than anticipated figures. This news pulled down gold and silver prices. Will precious metals continue to trade down this week? Here is a short outlook for June 10th to June 14th; this includes a fundamental analysis of the main reports, decisions and publications that may affect precious metals markets. These include: U.S core PPI, BOJ monetary statement, China’s new loans, Australia’s employment report, Canada’s manufacturing sales, GB manufacturing conditions, Japan Current account, U.S retail sales, and U.S. jobless claims.
Gold price declined during the previous week by 0.68%; on the other hand, the average weekly price reached $1,401.24 /t. oz which was 0.65% below last week’s average.
The price of silver fell last week by 2.18%; conversely, the average weekly rate was $22.41/t oz, which was only 0.05% below last week’s.
On Friday, the U.S non-farm payroll report came out. The report showed a slightly higher than expected growth in number of jobs added in May. This news pulled down the prices of gold and silver. As seen in the table below, the developments in the U.S jobs market tend to be negatively correlated with gold and silver.
This improvement in jobs market could lead the Fed to taper its current QE3 program, which is likely to reduce the concerns of investors of any future rise in inflation. In turn, this development is likely to pull down precious metals prices. Nonetheless, analysts still think Bernanke won’t taper QE3 until the job market will show a significant improvement in the coming months. The current belief is that QE3 will be slashed by the end of the year.
Herein is a short overview that outlines the main publications, events and decisions that may affect gold and silver next week between June 10th and June 14th.
The precious metals market has been experiencing an unclear trend in recent weeks as gold and silver change direction almost on a weekly basis. I think this pattern suggest the bullion traders are unsure about the future of precious metals. On the one hand, the developments in the currencies markets including the rise and fall of the Euro, and Japanese yen against the USD may have contributed to the unclear trend in commodities markets. On the other hand, the devaluations of Aussie dollar against the USD may have pulled down precious metals prices. In Asia, the concerns regarding the future demand for precious metals in China and India, two leading PM importers, contribute to the unclear trend of gold and silver. By the end of last week, China’s trade balance report showed a slight drop in growth of exports. This news could pull down on Monday not only the Aussie dollar but also PM prices.
China’s upcoming reports regarding new loans could shed some light on the progress of China’s economy. In the U.S, the upcoming reports including: retail sales, PPI, and consumer sentiment may provide some perspective regarding the progress of the U.S economy. If these reports will show signs of progress, they could rally equities markets and indirectly drag down bullion prices. The upcoming BOJ monetary policy meeting could stir up the forex markets and indirectly affect precious metals, assuming BOJ will surprise with big headlines.
The SPDR gold trust ETF holdings continue to fall: the ETF’s amount of gold held fell by 6.3% during May and June. If gold holdings will continue to drop, they could indicate the demand for gold as an investment continues to dwindle. Finally, the Indian Rupee depreciated again against the USD during the previous week; if this trend will persist; it may adversely affect the demand of gold in India.