Gold And Silver Outlook For December 10, 2012

Includes: FXA, FXE, GLD, UUP
by: Lior Cohen

Gold and silver edged down during last week. Will precious metals change direction and rally this week? As I have pointed out in the recent precious metals weekly outlook, there are several events and reports that may affect bullion this week. These items include: the FOMC meeting, U.S trade balance, U.S CPI and PPI, and EU Summit. On today's agenda: Japan GDP, China's Trade Balance, Governor King speaks and China's New Loans. This week's FOMC meeting will take place while Congress counties to deliberate over the austerity steps needed to cut the Federal budget and avoid the fiscal cliff.

On Friday, the price of gold edged up by 0.22% to $1,704.5; Silver price also edged up by 0.05% to $33.07. During last week, gold declined by 0.37%; silver, by 0.39%. Moreover, during last week, the SPDR Gold Shares (NYSEARCA:GLD) also decreased by 0.55% and reached by December 7th 165.13.

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 1st). During recent weeks the price of silver slightly rose while the price of gold edged down.

On Today's Agenda

Japan GDP for Q3: In the first estimate, the GDP contracted by 0.9% compared (Q-o-Q); in the second quarter the GDP expanded by only 0.3%; this news may affect the strength of the Japanese Yen.

China's Trade Balance: In the previous report, China's trade balance increased to a $32 billion surplus; if the surplus will further rally, it could indicate that China's economic growth is rising and thus may positively affect bullion.

China New Loans: According to the previous report, the total loans fell; this report is another indicator to the economic progress of China.

Governor King speaks: BOE's Governor will talk about England's inflation and employment conditions; he might also offer some refer to the recent MPC monetary policy meeting; this talk may influence British Pound traders.

Currencies / Bullion Market - December Update

The Euro/ USD edged down on Friday by 0.33% to 1.2927. During last week, the Euro/USD slipped by 0.45%. Conversely, some currencies such as Aussie dollar appreciated during last week against the USD by 0.58%. This mixed trend of these "risk currencies" may have contributed to the low volatility of bullion prices during last week. The correlations among gold, Euro and Aussie weakened in recent days: during the past several weeks, the linear correlation between gold and Euro /USD reached 0.32 (daily percent changes); the linear correlation between the gold and AUD /USD was 0.36 (daily percent changes). Thus, if the Euro and other risk currencies will rally against the USD, they are likely to pull up gold and silver.

Daily Outlook

The prices of gold and silver edged down during last week. I suspect precious metals could change direction and rally this week. This possibility is more likely if the FOMC decides to expand its monetary policy and introduce additional stimulus. The ongoing concerns regarding the fiscal cliff could contribute to the volatility of precious metal and raise the odds of the Fed intervening again in the markets. The upcoming reports including: trade balance, retail sales, CPI and PPI, could affect not only the USD but also precious metals prices. If these reports will show the U.S economy is growing, they could adversely affect precious metals prices. Finally, if the Euro and other "risk currencies" will rally during the week against the USD, they are likely to pull up precious metals.

For further reading" Choosing Between Gold and Silver"

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.