The prices of gold and silver went up last week, and I suspect bullion rates will continue to trade up during this week. As I have pointed out in the precious metals weekly outlook the main events of the week will revolve around the U.S GDP, Bernanke's speech at Jackson Hole, U.S pending home sales and China's manufacturing PMI. There are still speculations around the future steps of ECB vis-à-vis its bond purchasing program that could continue affecting not only the euro but also precious metals rates during the week. On today's agenda: the German Business Climate Survey and FOMC member Pianalto Speaks.
On Friday, gold edged up by 0.01% to $1,672.9; silver rose by 0.55% to $30.71. During August, gold rose by 3.6%; silver, by 10%. Furthermore, on Friday the SPDR Gold Shares (GLD) also edged up by 0.05% and reached on August 24th 161.97.
As seen below, the chart shows the changes of normalized prices of precious metals in the last several weeks (normalized to 100 as of July 19th). During the past few weeks gold and silver had an upward trend.
On Today's Agenda
German Business Climate Survey: This survey presents the monthly developments of the business climate of Germany. In the previous report for July, the business climate index decreased to 103.3; if this downward trend will continue, it might adversely affect the euro, which is strongly and positively correlated with bullion rates;
Pianalto Speaks: Sandra Pianalto, the President of Federal Reserve of Cleveland and FOMC member, will give a speech regarding economic forecast and monetary policy;
Currencies / Bullion Market -August Update
The euro/USD decreased on Friday by 0.41% to 1.2513. Further, other currencies including the Aussie dollar also depreciated on Friday against the USD by 0.35%. The linear correlation between gold and euro is still robust: during July and August, the correlation between the gold and EURO/USD was 0.51 (daily percent changes); between gold and AUD/USD, 0.40. Therefore, if these currency pairs will continue to trade up against the USD, it could also pull up the prices of precious metals.
The prices of precious metals rose during most of last week. This upward trend may continue this week especially following last week's minutes of the FOMC meeting that renewed speculations that another FOMC stimulus plan is on the horizon. The upcoming speech, on Friday, of Bernanke at Jackson Hole might pump up the speculations around the next move of the FOMC. This in turn, might further rally bullion rates. The speculations around the future steps of ECB vis-à-vis its bond purchase program may also continue to affect the forex and commodities markets.
Today's publication of the German Business Climate Survey might have a modest effect on the euro and, in turn, bullion rates. If the speech of FOMC member Pianalto will reveal something regarding the future steps of the FOMC it could also affect the precious metals markets. Finally, if the euro and other "risk currencies" will trade up during the week they could contribute to the rally of precious metals.
For further reading: Financial Markets Outlook for August 27-31.