The prices of silver and gold changed direction and slightly declined last week. The moderate fall of precious metals coincided with the sharp appreciation of the USD against several currencies, mainly the Euro and Aussie dollar. The latest remarks made by ECB President following ECB's rate decision announcement contributed to a sharp fall in the Euro during last week. Will gold and silver change direction and rally this week? As I have pointed out in the latest precious metals weekly outlook, several reports and events may affect precious metals prices. These items include: BOJ monetary policy meeting, EU GDP, U.S retail sales, ECB President Draghi speaks, U.S consumer confidence and jobless claims weekly update. On today's agenda: EU Economic Summit.
On Friday, the price of gold declined by 0.26% to $1,666.2; Silver inched up by 0.12% to $31.44. During last week, gold decreased by 0.22%; silver, by 1.62%. Moreover, during last week, the SPDR Gold Shares (NYSEARCA:GLD) edged up by 0.07% and reached by February 8th 161.57.
In the chart below are the normalized prices of gold and silver between December and February (normalized to 100 as of November 30th). The prices moved in an unclear trend in recent weeks.
On Today's Agenda
EU Economic Summit: This summit will include the EU ministers of finance and other leading policymakers. In this summit these members are likely to converse over the EU multi-year budget, the progress of the EU economy and the future steps needed to recover the Euro Area; if in this Summit big headlines, will come out of it regarding policy, this could affect the direction of the euro;
Currencies / Bullion Market - February Update
The Euro/ USD decreased on Friday by 0.25% to 1.3365. During the previous week, the Euro/USD fell by 2.02%. Moreover, some currencies such as Aussie dollar and Canadian dollar also depreciated during last week against the USD by 0.85% and 0.55%, respectively. The recent depreciation of Euro and Canadian dollar may have partly influenced precious metals traders. The correlations among gold, Canadian dollar and Aussie dollar have weakened in recent days: during January/February, the linear correlation between gold and USD/CAD reached -0.20 (daily percent changes); the linear correlation between the gold and AUD /USD reached 0.35 (daily percent changes). These weak correlations might suggest the recent decline of gold and silver was partly affected or resulted from the shifts in the foreign exchange markets. Nonetheless, if the Euro and other risk currencies will change course and appreciate against the USD, they might positively affect gold and silver.
Prices of precious metals changed direction and declined during last week. But since the beginning of the month both gold and silver remained virtually unchanged. The shifts in the foreign exchange market seem to have a limited affect on the precious metals in recent weeks. In other words, the stagnation of precious metals is less related to the developments in the foreign exchange market and more related to the inner developments in the precious metals markets or other related markets. The U.S long term treasury yields continue to rise and this could have contributed to the low growth in demand for gold and silver as a safe haven investments. The FOMC will publish next week the minutes of the January FOMC meeting. If the minutes will offer some insight behind the future steps of the Fed it could help rally precious metals. Until then the prices of gold and silver are likely to keep moving with low volatility. The upcoming U.S related reports of this week include consumer confidence, retail sales and jobless claims could affect not only the USD but also precious metals. If the U.S economy will show little growth, it could pull down the USD and thus pressure up bullion rates. If BOJ will further expand its monetary policy it could adversely affect the yen, which is also related to precious metals. Finally, if the Euro and other "risk currencies" will change direction and appreciate during the week against the USD, they might positively affect precious metals.
For further reading see "Gold and Silver Outlook for February 11-15"