Gold and silver, much like the Euro, changed direction and declined during last week. The ongoing speculations around the future steps of Spain in regards to its debt problems might reach a new climax this week in the upcoming EU Economic Summit - the main event of the week as I have indicated in the precious metals weekly outlook. During this week the U.S CPI and Philly Fed Index will be published and may affect the foreign exchange and commodities markets. On today's agenda: China's CPI, U.S. Retail Sales Report, BOC Business Outlook Survey, Minutes of RBA Monetary Policy Meeting and FOMC member Lacker will speak.
On Friday, Gold decreased by 0.62% to $1,759.7; Silver also fell by 1.21% to $33.67. During last week, gold declined by 1.18%; silver, by 2.61%. Furthermore, on Friday the SPDR Gold Shares (NYSEARCA:GLD) also decreased by 1.48% and reached by October 12th 170.06.
As seen below, the chart shows the developments of normalized prices of precious metals during the month (normalized to 100 as of September 28th). During last week both gold and silver have had a downward trend.
On Today's Agenda
China's CPI: during July the Chinese inflation rate increased to an annual rate of 2%; this rate is well below China's inflation target of 4%. If the inflation will remain low it could indicate that China's economic progress isn't recuperating; China is among the leading countries in importing gold and silver;
U.S. Retail Sales Report: in the previous report regarding August, the retail sales rose by 0.8%; this report could signal the changes in U.S's commodities demand and thus may affect commodities prices;
FOMC member Lacker's Speaks: the FOMC member will talk about his outlook for U.S economy;
Minutes of RBA Monetary Policy Meeting: The minutes of the recent monetary policy meeting of the Reserve Bank of Australia will show the reasons behind the board's decision to lower the rate to 3.25%; the minutes of this meeting may affect the Australian dollar and consequently gold and silver prices;
Currencies / Bullion Market - October Update
The Euro/ USD edged up on Friday by 0.18% to 1.29521. During last week, the Euro/USD declined by 0.7%. On the other hand, several currencies including Aussie dollar appreciated last week against the USD by 0.5%. The correlation between gold and Euro remains mid-strong and positive: during September-October, the linear correlation between the gold and EURO/USD was 0.64 (daily percent changes); the linear correlation between the gold and AUD/USD was 0.69 (daily percent changes). Following last week's mixed trend in forex markets in which the Euro depreciated while the Aussie dollar appreciated may have contributed to the low volatility of bullion prices. Nonetheless, if the Euro and other risk currencies will resume their rally, they are likely to pull up gold and silver.
The prices of precious metals slightly declined throughout last week, but this downward trend may change direction as this week will progress especially if some uncertainty around Spain and Greece will dissipate. I still think there won't be big shifts in the prices of precious metals and they will continue to move in small scales. If Spain will make a request for ECB bond purchase program and Greece will receive its next bailout funds in the upcoming EU Economic Summit and thus ease some of the concerns investors have in regards the these nations' stability, this could help rally the Euro and consequently also pull up the prices of precious metals. This week's publications of the U.S CPI, and Philly Fed could affect the commodities market assuming these reports will show sharp changes from last month's numbers. Finally, today's U.S retail sales report could rally commodities prices if the report will show sharp growth in retails sales.
For further reading see" QE3 Is Here, So Why isn't Gold Pulling Up? "