Gold slightly increased again during last week. On the other hand, the price of silver slipped. The recent developments in Cyprus raised the demand for safe haven investments at the beginning of the previous week. Over the weekend, the E.U leaders decided to approve the bailout plan of Cyprus and hold back the controversial deposit levy plan. Nonetheless, accounts holders of over 100k euro will be penalized along with senior bondholders of Laiki Bank. The FOMC meeting was concluded last week with no big headlines. Will precious metals rise this week? As I have stated in the latest precious metals weekly projection, several reports, speeches and events may affect precious metals rates. These items include: U.S core durable goods, Canada's CPI, German retail sales, American new and pending home sales reports, EU monetary developments, U.S GDP and U.S jobless claims. This news might affect not only the Euro but also precious metals prices. On today's agenda: Bernanke's Speech.
On Friday, the rate of gold fell by 0.48% to $1,606.1; Silver also fell by 1.76% to $28.67. During March, gold rose by 1.8%; silver, by 0.97%. Moreover, during last week, the SPDR Gold Shares (GLD) slightly increased by 1% and reached by March 22nd 155.55.
In the chart below are the normalized rates of gold and silver between January and March (normalized to 100 as of December 31st). The rates of gold and silver moved in an unclear trend in recent weeks.
On Today's Agenda
Bernanke's Speech: Bernanke will speak at the London School of Economics and Political Science. The title of his speech is "Monetary Policy and the Global Economy". Following last week's FOMC meeting in which the Fed left its policy unchanged, the Chairman of the Fed didn't reveal anything about the future plans of the Fed vis-à-vis its QE3 program;
Currencies / Bullion Market - March Update
The euro/USD bounced back on Friday by 0.71% to 1.2989. During last week, the euro/USD decreased by 0.67%. Conversely, many other currencies such as the Aussie dollar and Japanese yen appreciated during last week against the U.S dollar by 0.34% and 0.86%, respectively. The mixed trend in major currencies against the U.S dollar may have moderately contributed to the mixed trend of gold and silver prices. The correlations among gold, Japanese yen and Aussie dollar remained mid-weak during the month: during March, the linear correlation between gold and USD/yen was -0.27 (daily percent changes); the linear correlation between the gold and AUD/USD was 0.23 (daily percent changes). These weak relations suggest the recent developments in precious metals markets had little to do with the daily developments in the foreign exchange markets. The recent developments regarding the Cyprus bailout might help rally the euro. Since the correlations among precious metals and risk currencies are low, the rise of the euro isn't likely to pull up precious metals.
Prices of gold and silver moved in an unclear trend in recent weeks. The recent news regarding the Cyprus bailout might pull up the euro. This shift in market sentiment might lower the demand for safe haven investments including precious metals and U.S long term treasuries bonds. Bernanke's speech will affect the direction of precious metals only if he will be able to offer a big headline regarding the FOMC's monetary policy. This scenario is less likely. This week, several reports in the U.S will be published including: new and pending home sales, core durable goods, GDP for Q4 and jobless claims. These reports could affect not only the US dollar but also gold and silver prices. If the U.S economy will keep showing signs of growth, it could rally the USD and thus drag down precious metals rates. Finally, if GLD's holdings will continue to dwindle - since the beginning of 2013 the holdings fell by almost 10% - this could serve as another indication for the drop in demand for precious metals.