Gold and silver continued to trade down during most of last week. By the end of the week, however, the prices of gold and silver bounced back following the disappointing U.S non-farm payroll report. The recent developments in the forex markets including the tumble of the Japanese yen against leading currencies such as the Euro and US dollar, following the recent decision of the Bank of Japan, didn't seem to affect precious metals. Will gold and silver continue to fall this week? As I have reviewed in the recent precious metals weekly outlook, several reports, speeches and events may affect precious metals prices. These items include: U.S retail sales, minutes of the FOMC meeting, U.S industrial production, China's new loans, EU Summit, and U.S jobless claims. On today's agenda: Bernanke's Speech, minutes of BOJ monetary policy meeting, German Industrial Production, Bank of Japan - Monetary Policy Minutes and China's CPI.
On Friday, the price of gold rose by 1.51% to $1,575.5; Silver also increased by 1.69% to $27.22. During April, gold declined by 1.21%; silver, by 3.79%. Moreover, during last week, the SPDR Gold Shares (NYSEARCA:GLD) slightly decreased by 1.07% and reached by April 5th 152.81. Shares of iShares Silver Trust (NYSEARCA:SLV) plummeted by 3.8% during last week.
In the chart below are the normalized rates of gold and silver between January and April (normalized to 100 as of December 31st). The prices of gold and silver declined in the past several weeks.
On Today's Agenda
German Industrial Production: This report will refer to the developments in the industrial production of Germany for March 2013; in the recent report, German industrial production remained unchanged (M-O-M) during February;
Bernanke's Speech: Chairman of the Federal Reserve Ben Bernanke will give a speech at the 2013 Financial Markets Conference, in Atlanta, Georgia. The title of his speech is "Stress-Testing Banks: What Have We Learned?" I suspect this speech will have little effect on precious metals markets;
Minutes of Bank of Japan Monetary Policy: The Bank of Japan will publish the minutes of the latest monetary policy meeting and rate decision. In last week's meeting, BOJ decided to augment its monetary base within the next couple of years in order to reach the Bank's inflation target of 2%;
Japan Current Account: This report will present the changes in the difference between exports and imports for Japan during last month;
China's CPI: During February, the Chinese inflation rate increased to an annual rate of 3.2%, which is still lower than China's inflation target of 4% in annual terms. But if inflation will continue to rise, it could indicate that China's economy is heating up again.
Currencies / Bullion Market - April Update
The Euro/ USD rose again on Friday by 0.42% to 1.2991. During last week, the Euro/USD increased by 1.37%. Conversely, other currencies such as the Aussie dollar and Japanese yen depreciated during last week against the U.S dollar by 0.27% and 3.61%, respectively. The mixed trend in major currencies against the U.S dollar didn't seem to hold back the prices of gold and silver from tumbling down during most of last week. The correlations among gold, the Japanese yen and the Canadian dollar remained weak during March/April: the linear correlation between gold and USD/Yen was -0.10 (daily percent changes); the linear correlation between gold and USD/CAD was 0.32 (daily percent changes). These weak correlations imply the recent decline of precious metals rates had little to do with the daily changes in the foreign exchange markets.
Gold and silver declined during last week. The Euro slightly recovered during last week after the whole Cyprus debt crisis had pulled it down by the end of March. This recovery, however, didn't pull up the prices of gold and silver. The recent publication of the non-farm payroll helped rally precious metals and may continue this momentum at the beginning of the week. But I suspect as the week progresses precious metals will resume their downward trend. Today's reports include China's CPI, Japan Current Account, and German industrial production. These reports might affect the direction of gold and silver prices via the forex markets. If these reports show signs of progress in Japan, Germany and China, they may help rally precious metals. Bernanke's upcoming speech might influence precious metals traders only if he gives a big headline regarding the FOMC's monetary policy. Moreover, the upcoming publication of the minutes of the FOMC meeting might also stir up the bullion market if there are any hints regarding the future steps of the Fed. Several U.S reports will come out during the week such as industrial production and retail sales. If the U.S economy shows signs of growth, it could strengthen the USD and thus drag down gold and silver prices. Finally, if GLD's gold holdings continue to fall, this could indicate the demand for precious metals will dwindle.
For further reading:"Gold and Silver Outlook for April"