Gold and silver remained nearly unchanged last week, despite the sharp changes in other commodities markets, most notably the oil market, and the shifts in the foreign exchange markets. The recent non-farm payroll report, in which 114k jobs were added during September, pulled down commodities prices on Friday. In Europe, there are reports that it's just a matter of time before Spain will request the bailout from ECB. Until then, the uncertainty around the Euro will remain high; this sentiment could pull down the Euro, which is likely to drag along with it bullion prices. As I have indicated in the precious metals weekly outlook, the main events of the week will revolve around: Euro-Council meeting, G7 Summit, U.S. trade balance, the ongoing developments in Europe mainly around Spain and Greece, U.S. PPI and ECB President's speech. Today, Euro-group will convene, German Industrial Production report will come out, and Japan Current Account will be released.
On Friday, Gold declined by 0.87% to $1,780.8; Silver also fell by 1.51% to $34.57. During last week, gold increased by 0.39%; silver edged down by 0.01%. Furthermore, on Friday, the SPDR Gold Shares (GLD) also decreased by 0.57% and reached 172.62.
As seen below, the chart presents the shifts of normalized prices of precious metals during last week (normalized to 100 as of September 28th). During recent week, the prices of gold and silver shifted with an unclear trend.
On Today's Agenda
Euro-group Meeting: The Euro-group Meeting will be held in Brussels, in which the EU ministers of finance will talk about the recent political and monetary changes in Europe;
German Industrial Production: This report will show the changes in the industrial production of Germany for August. In the previous report, the German industrial production rose by 1.3% (M-O-M) during July;
Japan Current Account: This report will present the developments in the balance between exports and imports for Japan for last month. This news may affect the strength of the Japanese Yen.
Currencies / Bullion Market - October Update
The Euro/USD edged up on Friday by 0.18% to 1.3040. During last week, the Euro/USD rose by 1.44%. On the other hand, several currencies depreciated last week against the USD, including the Aussie dollar, which depreciated by 1.87%, probably due to the decision of RBA to cut its cash rate by 25pp. The correlation between gold and Euro remains mid-strong and positive. During September-October, the linear correlation between the gold and EUR/USD was 0.62 (daily percent changes); the linear correlation between the gold and AUD/USD was 0.71 (daily percent changes). Following last week's mixed trend in forex markets in which the Euro appreciated while the Aussie dollar depreciated may have contributed to the unclear trend of bullion prices. Nonetheless, if the Euro and other risk currencies will trade down, they are likely to also pull down gold and silver.
The prices of precious metals ended up on Friday very close to their prices from the end of September. The memories of QE3 seem to have dissipated, for now, in the bullion market. My guess is that gold and silver will continue with their unclear trend throughout the week. The uncertainty around Europe mainly vis-à-vis the debt crisis in Spain and Greece is likely to affect the Euro and other "risk currencies," which in turn, are likely to affect bullion prices. This week's publications of the U.S trade balance and PPI could affect the commodities market, if these reports will show sharp changes from last month's figures. Today's Euro-group meeting could affect the forex market if there are big headlines coming out of it. Finally, the ongoing strengthening of the Indian rupee is likely to raise the demand for gold in India.
For further reading see" Gold And Silver Outlook For October 8-12"