The prices of gold and silver remained nearly unchanged on a weekly scale. The optimism in the precious metals markets following the recent decision of U.S policymakers to raise taxes and averting the "fiscal cliff" didn't last long. The prices of gold and silver resume their downward trend on the last couple of days of last week following the recent minutes of the FOMC meeting and the rise in U.S employment. Will gold and silver continue to fall? As I have stated in the latest precious metals weekly outlook, several reports may affect precious metals this week. These items include: U.S trade balance report, China's new loans, ECB rate decision and jobless claims weekly update. On today's agenda: SNB Foreign Currency Reserve and Australian Trade Balance.
On Friday, the price of gold fell by 1.53% to $1,648.9; Silver price also tumbled by 2.52% to $29.92. During last week, gold edged down by 0.36%; silver, by 0.01%. Moreover, during last week, the SPDR Gold Shares (NYSEARCA:GLD) slipped by 0.06% and reached by January 4th 160.44.
As seen below, the chart shows the developments in the normalized prices of precious metals during November and December (normalized to 100 as of November 1st). During recent weeks, the prices of silver and gold have had a moderate downward trend.
On Today's Agenda
SNB Foreign Currency Reserve: The Bank will come out with its current Foreign Currency Reserve; according to the previous report, the forex reserves edged up compared to last month;
Australian Trade Balance: In the previous update, the seasonally adjusted deficit of goods and services rose to $2,088 million as of October. The export of non-monetary gold rose by $102 million; if the gold exports will continue to rally, it might suggest a rise in demand for non-monetary gold (see here last report);
Currencies / Bullion Market - January Update
The Euro/ USD edged up on Friday by 0.15% to 1.3069. Nonetheless, during last week, the Euro/USD fell by 1.11%. Conversely, some currencies such as Aussie dollar appreciated during the previous week against the USD by 1.03%. The unclear trend of these "risk currencies" didn't' seem to influence precious metals traders. The correlations among gold, Euro and Aussie remained weaker than in previous months: during December and January, the linear correlation between gold and Euro /USD reached -0.12 (daily percent changes); the linear correlation between the gold and AUD /USD was -0.03 (daily percent changes). These weak relations might suggest the recent movement in gold and silver didn't coincide or resulted from the shifts in the foreign exchange markets. Nonetheless, if the Euro and other risk currencies will decline against the USD, they are might adversely affect gold and silver.
Prices of precious metals might start the week increasing as a correction to sharp fall on the last couple of days of the week, but I still guess the prices of gold and silver will resume their downward trend as the week will progress. The uncertainty around the future steps of U.S policymakers in regards to the tackling the issue of raising debt ceiling or the future spending cuts needed might affect not only the USD but also gold and silver. Once these issues will take center stage again in the following weeks, they might help rally precious metals. In the meantime, the next major event that could affect gold and silver will pertain to the FOMC meeting to be held on the last days of January. The upcoming U.S reports including: Trade balance report and jobless claims could affect not only the USD but also precious metals rates. If these reports will show the U.S economy is further growing, they could adversely affect precious metals prices. if the ECB will decide to cut its short term rate, this could pull back the Euro and consequently weaken bullion. Finally, if the Euro and other "risk currencies" will fall during the week against the USD, they might also adversely affect gold and silver.
For further reading see "Gold and Silver Outlook for January 7-11"