During the previous week, gold and silver tumbled down. The main event of last week in the U.S was the FOMC statement. The FOMC kept policy unchanged but in the press conference that followed the statement, Bernanke stated the Fed may taper QE3 by end of 2013. This was enough to pull down gold and silver and the US dollar up. On Thursday, it was also reported thatChina’s credit squeeze, in which Chinese banks have lowered their lending volume, may have also pressured down the markets. Moreover China’s flash manufacturing PMI slipped in June. In other news: Jobless claims rose by 18k to reach 354k. Will gold and silver bounce back this week? Here is a short outlook for June 24th to June 28th; this includes a fundamental analysis of the main reports, and publications that may affect bullion markets. These include: U.S consumer confidence, EU economic summit, EU monetary development, U.S GDP for Q1 (final estimate), Canada’s GDP, U.S new and pending home sales, German retail sales, and U.S. jobless claims.
During last week, gold price sharply fell by 6.91%; moreover, the average price reached $1,340.20 /t. oz which was 3.18% below last week’s average rate. Gold ended the week at $1,291.7 /t. oz.
The price of silver also plummeted during last week by 9.09%; further, the average weekly rate was $20.97/t oz, which was 3.73% below last week’s rate.
Herein is a short overview that outlines the main publications, events and decisions that may affect gold and silver next week between June 24th and June 28th.
FOMC Meeting and Press Conference
Even though the Fed left its policy unchanged; this includes the Fed’s current $85 billion a month asset purchase program. On the one hand, n the press conference that followed Bernanke suggested the Fed may decide to ease down QE3 by the end of 2013 and end the program by mid-2014, providing, of course, the U.S economy will continue to progress at its current pace.
As seen below, the Fed’s policy announcements had little effect on prices of gold and silver on the day of publication but precious metals collapsed the next day. Part of the drop may have also been to financial squeeze in China’s banking system.
Based on the upcoming events and the recent developments, precious metals prices might rally as a correction to last week’s sharp drop. Last week’s drop of leading currencies against the USD including the Euro, Japanese yen and Aussie dollar helped drag down commodities prices.
In the U.S, the upcoming reports including: new home sales, GDP, and consumer confidence may provide some perspective regarding the progress of the U.S economy. If these reports will show signs of growth, they could drag down bullion prices.
Gold holdings of the SPDR gold trust ETF continue to fall: the ETF’s amount of gold held slipped by 2.29% during June. Moreover, the gold hoarding fell below 1,000 tons for the first time in years. If gold holdings will further fall, they could indicate the demand for gold as an investment continues to fall. Finally, the Indian Rupee changed direction and depreciated against the USD during last week; if this trend will persist; it may adversely affect the demand of gold in India.