Gold and silver tumbled down last week. Will gold and silver change course and rally this week? As I have stated in the recent precious metals weekly outlook, several reports may affect bullion rates. These items include: U.S new home sales, German manufacturing PMI, EU monetary developments, Canada's retail sales, Bank of Japan monetary statement, U.S GDP for Q1 2013, and U.S jobless claims. On today's agenda: U.S. TIC long term purchases, China's manufacturing PMI and U.S existing home sales.
On Friday, the price of gold rose slightly by 0.24% to $1,395.3; Silver decreased by 1.23% to $22.96. During April, gold declined by 12.51%; silver, by 18.85%. Moreover, during last week, the SPDR Gold Shares (NYSEARCA:GLD) also plummeted by 5.89% and reached by April 19th 135.47. Shares of iShares Silver Trust (NYSEARCA:SLV) also plunged by 11.4% during last week.
In the chart below are the normalized rates of gold and silver for 2013 (normalized to 100 as of December 31st). The rates of gold and silver have recently had a sharp downward trend.
On Today's Agenda
U.S. Existing Home Sales: This report will refer to the developments in U.S. existing home sales during March; in the previous report regarding February, the number of homes sales slightly increased to a seasonally adjusted annual rate of 4.98 million; if this trend will continue, it might pull up the U.S dollar;
HSBC's China Manufacturing PMI: this flash survey will refer to April 2013; in the previous survey regarding March 2013 the Manufacturing PMI increased to 51.7; the upcoming Manufacturing PMI survey could indicate the direction of China's growth in the manufacturing sectors; if the index will rise again, this may positively affect precious metals rates;
Currencies / Bullion Market - April Update
The Euro/ USD edged up on Friday by 0.02% to 1.3052. During last week, the Euro/USD decreased by 0.47%. Moreover, other currencies such as the Aussie dollar and Canadian dollar also depreciated during last week against the U.S dollar by 2.2% and 1.3%, respectively. The depreciation of leading currencies against the U.S dollar may have partly contributed to the downward trend of gold and silver during last week. The correlations among gold, Euro and Aussie dollar strengthened: during April the linear correlation between gold and USD/CAD was -0.58 (daily percent changes); the linear correlation between the gold and AUD/USD was 0.62 (daily percent changes). These correlations suggest the recent plunge of precious metals rates was partly related to the shifts in the foreign exchange markets.
The sharp fall in the prices of gold and silver may have stemmed from the shift in market sentiment towards precious metals. The minutes of the previous FOMC meeting, the decision of BOJ to augment its asset purchase program, the weak economic data on China may have also contributed to the tumble in gold and silver prices. Following such a sharp drop in prices, a correction might occur that will pull up gold and silver. But as the week will progress, if the current bearish market sentiment towards precious metals will persist, gold and silver are likely to resume their downward trend.
Today's reports include China's manufacturing PMI, and U.S. existing home sales. These reports might affect the path of gold and silver prices as indicated above. Several U.S reports will be published during the week such as new home sales, GDP for Q1 2013 and core durable goods. If the U.S economy will show signs of growth, it could strengthen the USD and thus drag down gold and silver prices. The upcoming monetary statement and economic outlook of Bank of Japan might also influence not only Japanese yen traders but also commodities traders. Finally, if GLD's gold holdings will continue to fall, this could indicate the demand for precious metals is contracting.
For further reading: "Is the Golden Era of Gold Over?"
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.