During last week, gold and silver traded up. Nonetheless, most of their gain came on Monday. During the rest of the week, both metals had an unclear trend. Their recent rally coincided with the ongoing depreciation of the US dollar against currencies including Euro and Aussie dollar. The weakness in the U.S equity market may have also contributed to the latest rally of precious metals prices. During the previous week, several U.S reports came out and didn’t show a clear direction as to the progress of the American economy, which may have contributed to precious metals’ unclear trend during most of the week. These reports included: existing home sales slipped by 1.2% in June; jobless claims rose by 7k to reach 343k. Conversely, core durable goods spiked by 4.2% during last month;new home sales jumped by 8.3% in June. Will gold and silver continue to trade up this week? Here is a short outlook for July 29th to August 2nd; this includes a fundamental analysis of the main events, decisions and reports that may affect bullion markets. These include: FOMC meeting, ECB rate decision, U.S non-farm employment update, China and U.S manufacturing PMI, U.S’s GDP second quarter estimate, BOE rate decision, U.S pending home sales, and U.S. jobless claims.
Gold price rallied by 2.21% during last week; furthermore the average rate reached $1,328.10 /t. oz which was 3.30% above last week’s average. By the end of the week, gold settled at $1,321.50 /t. oz.
Silver price also rose by 1.60%; further, the average weekly rate was $20.13/t oz, which was 2.72% above last week’s rate.
Herein is a short overview that breaks down the main publications, events and decisions that will enfold next week between July 29th and August 2nd and could affect gold and silver.
The high volatility of precious metals prices could return this week as many publications and decisions will come to fruition next week. Let’s break down the upcoming events by regions:
The five main news items that will unfold during this week are: non-farm payroll report, first estimate of GDP for the second quarter, FOMC meeting and consumer sentiment. The current expectations are that the FOMC won’t change its policy this time. The September meeting, however, is the one that some analysts speculate could be the one, in which the Fed will announce of tapering QE3. Until then, the speculations around the Fed’s next move will remain high and will keep gold and silver prices moving in an unclear trend. If in the upcoming meeting Bernanke will clarify the Fed’s position by providing a better understanding as to when the FOMC plans to taper its asset purchase program, this could determine the direction of gold and silver. If Bernanke will reiterate his words from the last press conference following the FOMC meeting, this could drag down gold and silver. If we will getBernanke from his latest testimony, in which he suggested the U.S economy still needs the Fed’s asset purchase program; this tone is likely to pull up precious metals prices. The upcoming reports listed above will contribute to the speculations regarding the Fed’s next move. Moreover, if the payroll report will show growth in jobs of well over 150k as it did in recent months, this may pressure down gold and silver rates as they tend to be negatively correlated with precious metals daily changes.
The upcoming manufacturing PMI report will indicate the direction of China’s manufacturing sector. If the flash report is accurate, then the upcoming PMI report will show a decline in China’s manufacturing conditions, which could indirectly adversely affect commodities prices including gold and silver.
ECB and BOE will announce of any changes to their respective monetary policy. The current expectations are that it is less likely that either bank will change its current policy. Draghi’s press conference, however, could affect the Euro. If he will keep his recent positive wording regarding the future progress of EU, this could positively affect the Euro, which tends to be positively correlated with precious metals prices.
The upcoming developments in the forex markets could also affect the direction of silver and gold. If leading currencies such as Euro, Japanese yen and Aussie dollar further appreciate against the US dollar, they may further pressure up precious metals prices. In India, the Indian Rupee depreciated against the US dollar during the pervious week; if the Rupee will continue to fall; it may also adversely affect the demand of gold and silver in this country.
Finally, the recent recovery of gold price didn’t help pull up gold holdings of SPDR gold trust ETF that continues to dwindle: Since the beginning of July, the ETF’s gold holdings fell by 4.35% and by 31.35% during 2013 (up-to-date). Current gold holdings are at 927.355 tons. If the ETF’s gold holdings continue to decline, this could indicate the demand for gold as an investment further falls.
My guess is that gold and silver’s recent rally won’t last long and they will resume their downward trend.