The price of gold slightly rose during last week. On the other hand, the price of silver inched down. The publication of several U.S reports including: the retail sales monthly report, jobless claims weekly update, the PPI and CPI monthly updates didn't seem to affect precious metals prices during last week. Will gold and silver resume their rally this week? As I have pointed out in the recent precious metals weekly outlook, several reports, events and decisions may affect precious metals prices. These items include: FOMC meeting, U.S housing starts, Philly fed index, China's manufacturing PMI and U.S jobless claims. The big news item from the weekend was related to the Cyprus bailout plan that is currently pulling down the Euro and other risk related currencies. This news might pull up safe haven investments including gold and silver. On today's agenda: Minutes of Australia's Bank Monetary Policy Meeting.
On Friday, the price of gold edged up by 0.12% to $1,592.6; Silver also slightly rose by 0.15% to $28.83. During March, gold rose by 0.94%; silver, by 1.52%. Moreover, during last week, the SPDR Gold Shares (NYSEARCA:GLD) slightly increased by 0.84% and reached by March 15th 154.
In the chart below are the normalized prices of gold and silver between January and March (normalized to 100 as of December 31st). The prices of gold and silver have had an unclear trend in recent weeks.
On Today's Agenda
Minutes of Australia's Bank Monetary Policy Meeting: The minutes of the latest monetary policy meeting of the Reserve Bank of Australia may offer some insight behind the board's decision to keep the basic interest rate flat at 3%; the minutes of this meeting may affect the Australian dollar and consequently gold prices.
Currencies / Bullion Market - March Update
The Euro/ USD rose on Friday by 0.6% to 1.3076. During the previous week, the Euro/USD increased by 0.55%. Moreover, many other currencies such as the Aussie dollar and Japanese yen also appreciated during last week against the U.S dollar by 1.7% and 0.75%, respectively. The rally of major currencies against the U.S dollar may have moderately contributed to the rose of gold price. The correlations among gold, Japanese yen and Aussie dollar remained mid-weak in recent weeks: during February/March, the linear correlation between gold and USD/Yen reached -0.31 (daily percent changes); the linear correlation between the gold and AUD/USD reached 0.29 (daily percent changes). These weak correlations might imply the recent rally of gold had little to do with the daily changes in the foreign exchange markets. The recent update regarding the Cyprus bailout is dragging down the Euro and Aussie dollar. Since the correlations among precious metals and risk currencies are low, the tumble of the Euro isn't likely to drag down precious metals. Moreover, this shift in market sentiment might help rally gold and silver prices.
Prices of gold and silver didn't do much during last week. The recent news regarding the Cyprus bailout is dragging down the Euro. This shift in market sentiment might raise the demand for safe haven investments including gold, silver and U.S long term treasuries bonds. If long term treasuries securities yields will fall, this could serve as an indication for a shift in market sentiment from bullish to bearish. The upcoming FOMC meeting is likely to be the main event of the week. As I have stated in the weekly report, this event might have a short term effect on precious metals prices, as was the case back in the previous meeting. This week, several reports in the U.S will come out including: Philly fed survey, housing starts, existing home sales and jobless claims. They could affect not only the US dollar but also precious metals rate. If the U.S economy will keep showing signs of progress, it could pull up the USD and thus adversely affect precious metals rates. Finally, the GLD ETF is keep cutting back on its gold holdings: since the beginning of the year the holdings declined by more than 8%. This could serve as an indication for the decline in demand for precious metals as investments.
For further reading see" Gold and Silver Outlook for March 18-22"