Gold and silver changed direction and rose on Friday following the higher-than-expected growth in U.S jobs. The rally came after bullion prices declined on Thursday following the decision of the FOMC to keep its policy unchanged.
As I pointed out in the precious metals weekly outlook, the main events of this week will revolve around the U.S trade balance and Bernanke's speech. Today, Bernanke gives a speech. Later on, the RBA is slated to announce its interest rate decision. If there will be a change in the rate, it could affect the Aussie dollar, which is strongly linked with bullion.
Gold rose on Friday by 1.17% to $1,609.3; Silver also increased by 2.99% to $27.8. During the week, gold fell by 0.83 %; silver rose by 1.1%. Furthermore, on Friday SPDR Gold Shares (SPDR Gold Trust ETF: GLD) also rose by 0.92% and reached 155.55.
As seen below, the chart presents the developments of normalized rates of precious metals in the last couple of weeks (normalized to 100 as of July 20th). As seen in the chart, during the last few weeks, gold and silver presented an unclear trend.
Click to enlarge
On Today's Agenda
Bernanke's Speech: Following the FOMC decision not to introduce any new stimulus plans, the markets will continue to seek hints in regards to the future steps of the Fed. Bernanke will talk before the 32nd General Conference of the International Association for Research in Income and Wealth. The speech's title is "Economic Measurement ".
Currencies/Bullion Market: August Update
The Euro/USD rose on Friday by 1.7% to 1.2387. During August (UTD), the Euro/USD decreased by 0.67%. Further, other currencies including the AUD and CAD also appreciated on Friday against the USD by 0.99% and 0.61%, respectively. The linear relation between gold and the euro remains strong: during the past month, the correlation between the gold and the EUR/USD was 0.705 (daily percent changes). Thus, if the euro will change direction and fall, it could also put downward pressure on precious metals.
Gold and silver zigzagged in the last week, moving from gains to losses, but by the end of the week, both didn't finish much different from the previous week. This unclear trend may continue during this week. If Bernanke were to provide some insight or hints in his speech as to the future steps of the FOMC, then bullion traders might act on that. I suspect Bernanke won't do any such thing. In such a case, bullion rates may continue to trade with an unclear trend. Finally, if the euro and other "risk currencies" change direction and make a correction following Friday's rally, this could also adversely affect precious metals rates.
For further reading: See Gold & Silver | Weekly Outlook August 6-10.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.