Gold and silver changed direction and traded down during most of last week. Will precious metals continue to trade down this week? As I have stated in the precious metals weekly outlook, there are several events and reports that may affect precious metals this week. These items include: U.S non-farm payroll report, ECB rate decision, and rate decisions from other leading central banks including England, Canada and Australia. On today's agenda: Euro-group Summit, GB and U.S Manufacturing PMI monthly reports. In the background, the deliberations in Congress over cutting the budget deficit in the next decade to avoid the fiscal cliff and next week's FOMC meeting could influence forex and commodities traders during December. Yesterday, HSBC reported that China's manufacturing PMI rose to 50.5 in November compared with 49.5 in October.
On Friday, the price of gold declined by 0.94% to $1,710.9. Silver price plunged by 3.33% to $33.2. During last week, gold declined by 2.3%; silver, by 2.67%. Moreover, during last week, the SPDR Gold Shares (GLD) also decreased by 2.1% and reached 166.05 by November 30th.
As seen below, the chart shows the developments in the normalized prices of precious metals during the past several weeks (normalized to 100 as of November 16th). During recent weeks the price of silver slightly rose while the price of gold edged down.
On Today's Agenda
Euro-group Meeting: The Euro-group Meeting will convene again in Brussels. Following last week's Greek bailout decision, it lowers the odds that this Summit will affect the financial markets.
Great Britain Manufacturing PMI: In the previous report for October, the index fell to 47.5%. This means the manufacturing sectors in Great Britain are contracting. This index may affect the British Pound.
U.S. Manufacturing PMI: According to the previous report regarding October the index slightly increased to 51.7%. This means the manufacturing sectors in the U.S are growing at a slightly faster rate - if this trend will continue to rise, it may adversely affect gold and silver.
Currencies / Bullion Market - November Update
The Euro/ USD edged up on Friday by 0.05% to 1.2986. During last week, the Euro/USD rose by 1.8%. Moreover, some currencies such as the Aussie dollar also appreciated during last week against the USD by 1.16%. This upward trend of these "risk currencies" may have contributed to the rally of the bullion market during last week. The correlations among gold, Euro and Aussie slightly strengthened in recent days: during the past several weeks, the linear correlation between gold and Euro /USD reached 0.57 (daily percent changes); the linear correlation between gold and AUD /USD was 0.55 (daily percent changes). Thus, if the Euro and other risk currencies will continue to rise against the USD, they are likely to positively affect gold and silver.
The price of gold and silver declined during last week, mainly on Friday. I suspect there might be a correction and bullion may rally on the first day of the week especially after the positive news of the growth in China's manufacturing sectors. The ongoing concerns regarding the fiscal cliff could contribute to the volatility of commodities in the weeks to follow. These concerns may drive investors towards safe haven investments such as precious metals. Nonetheless, the prices of gold and silver may decline on a weekly scale. The upcoming U.S reports, including: manufacturing PMI and the non-farm payroll report, could affect not only the USD but also bullion prices. If these reports will show the U.S economy is expanding, they could lower the chances of the Fed intervening again in the U.S financial markets. This, in turn, could adversely affect precious metals prices. The upcoming rate decisions in Euro Area, Britain, Australia and Canada could affect their respective currencies. If any of the central banks in these areas will decide to cut its cash rate this could depreciate its local currency and in the process strengthen the USD. Finally, if the Euro and other "risk currencies" will dwindle during the week against the USD, they are likely to pull down precious metals.
For further reading see" Gold and Silver Outlook for December."