Gold and silver continued their downward tend throughout most of last week. The FOMC decided to purchase treasury securities at a pace of $45 billion per month starting January 2013 (in addition to purchasing mortgage backed securities at a pace of $40 billion). This news, however, didn't help rally gold and silver last week even though the US dollar deprecated against major currencies. Will precious metals continue to trade down this week? As I have stated regarding the recent precious metals weekly outlook, several reports may affect precious metals this week. These items include: core durable goods, Bank of Japan's monetary policy meeting, U.S housing starts, existing home sales and Philly Fed survey. On today's agenda: U.S. TIC Long Term Purchases and ECB President will give a speech.
On Friday, the price of gold edged down by 0.04% to $1,695.2; Silver price, on the other hand, edged up by 0.01% to $32.30. During last week, gold declined by 0.55%; silver, by 2.34%. Moreover, during last week, the SPDR Gold Shares (GLD) also decreased by 0.59% and reached by December 14th 164.15.
As seen below, the chart presents the developments in the normalized prices of precious metals during November and December (normalized to 100 as of November 1st). During recent weeks, the price of silver and gold slightly declined.
On Today's Agenda
U.S. TIC Long Term Purchases: The Treasury International Capital monthly report will show the developments in the purchases and sales of US long term treasuries as of October. In the previous update referring to September, the net foreign sales of U.S Treasuries longer-term notes were only $3.3 billion;
ECB President Will Testify: ECB President, Mario Draghi, will testify at the Committee on Economic and Monetary Affairs, in Brussels; his testimony will be about the developments of the EU economy. If Draghi will refer to ECB's monetary policy this might affect the Euro;
Currencies / Bullion Market - December Update
The Euro/ USD rose on Friday by 0.66% to 1.3163. During last week, the Euro/USD increased by 1.83%. Moreover, some currencies such as Aussie dollar also appreciated during last week against the USD by 0.74%. The appreciation of these "risk currencies" may have curbed the decline in bullion prices during last week. The correlations among gold, Euro and Aussie have weakened during last week: during the past several weeks, the linear correlation between gold and Euro /USD reached 0.12 (daily percent changes); the linear correlation between the gold and AUD /USD was 0.11 (daily percent changes). This weak correlation might suggest the fall in gold and silver during last week didn't coincide or resulted from the depreciation of the USD. Nonetheless, if the Euro and other risk currencies will continue to rise against the USD, they are likely to positively affect gold and silver.
The prices of gold and silver fell during last week. The decision of the FOMC contributed to the weakening of the US dollar albeit it didn't help rally gold and silver. I still suspect precious metals will resume their upward trend at the beginning of the year as the new expanded QE3 program will progress. In the meantime, precious metals are likely to further dwindle as the year is winding down. The fiscal cliff is still a big uncertainty that could contribute to the volatility of precious metal for the rest of the year. The upcoming U.S reports including: core durable goods, final estimate of the GDP, housing starts, jobless claims and Philly Fed index could affect not only the USD but also precious metals prices. If these reports will show the U.S economy is expanding, they could adversely affect precious metals prices. Finally, if the Euro and other "risk currencies" will rise during the week against the USD, they are likely to curb the downward trend of precious metals.
For further reading see "Choosing Between Gold and Silver"