During last week, gold and silver bounced back. The depreciation of the US dollar against leading currencies may have contributed to the rally of gold and silver. The decision of RBA to cut its rate by 0.25 pp may have pulled up the Aussie dollar as this decision was anticipated. In the U.S, jobless claims rose by 5k to reach 333k. Will gold and silver change direction this week? Here is a short outlook for August 12th to August 16th; this includes a fundamental analysis of the main events and reports that may affect precious metals markets. These include: U.S core CPI and PPI, Philly fed survey, Japan’s GDP, U.S housing data, Canada’s manufacturing sales, U.S retail sales, U.S federal budget update, German ZEW economic sentiment, and U.S. jobless claims.
The price of gold edged up by 0.18% last week; conversely, the average price reached $1,298.52 /t. oz which was 1.42% below last week’s average rate. Gold ended the week at $1,312.50 /t. oz.
Silver price rallied by 2.45%; further, the average weekly rate was $19.87/t oz, which was 1.96% below last week’s rate.
Herein is a short overview that shows the main publications, events and decisions that will come to fruition next week between August 12th and August 16th and may affect precious metals.
Despite the recent rally of precious metals prices, their movement remains erratic and their direction remains unclear. For next week, let’s break down the upcoming reports and events by regions:
The main reports that will be published this week are: Philly Fed index, housing starts and building permits, CPI, PPI, retail sales and jobless claims. In the recent FOMC meeting, the FOMC didn’t offer any additional information regarding whether a tapering in September is imminent. The developments in the U.S economy could influence FOMC members that it’s time to slowdown the asset purchase program. If the inflation will remain low, this could keep the Fed’s worries low regarding potential inflation pressures due to QE3. Moreover, the upcoming reports could affect the direction of gold and silver prices via the speculations around whether the future steps of the FOMC. If these reports will beat expectations and will keep showing progress it could raise the odds of tapering QE3, which may adversely affect gold and silver. I still think the slow progress in the employment, the potential future budget cuts the government may implement and the low inflation will keep the asset purchase program in 2013.
China and India
The two leaders in importing gold and silver – India and China – will continue to play a role in the progress of gold and silver prices. If the demand for gold and silver in China and India will continue to rise, this could maintain the current levels of precious metals prices. Conversely, if the Indian Rupee will keep falling as it did in recent weeks this could curb the rise in demand for precious metals.
The situation in Europe hasn’t improved but Germany’s upcoming ZEW economic sentiment report might provide some positive signs of growth, which could also pull up the Euro. Additional EU reports will come out including: CPI and GDP for the second quarter. If these reports will continue to show little signs of progress, they could drag down the Euro, which tends to be correlated with precious metals.
Australia, Japan and Canada
These countries’ relations with gold and silver are mostly via their respective currencies. The Australian currency bounced back last week after the anticipated rate reduction to 2.5%. If the Aussie will change direction and fall this could pull down bullion prices. In Japan the minutes of the monetary policy meeting and the GDP report could also affect the yen. In Canada, Manufacturing Sales report could affect the Canadian dollar.
Finally, gold holdings of SPDR gold trust ETF continue to tumble: During August, the ETF’s gold holdings fell by 1.75% and by 32.55% during 2013 (up-to-date). Current gold holdings are at 911.13 tons. If the ETF’s gold holdings will keep declining, this could indicate the demand for gold as an investment will diminish.
I remain neutral of gold and silver. My guess is that gold and silver might slightly slide this week but their overall trend will remain unclear.