Gold And Silver Outlook For November 5, 2012

Includes: GLD, SLV
by: Lior Cohen

Gold and silver resumed their downward trend during last week. Will precious metals continue to dwindle during the upcoming week? The U.S presidential elections will be held on Tuesday. These elections could lead to a sharp fall in trading volume in all major financial markets. Moreover, this could lead to sharp shifts in prices. In the previous elections during the week of November 6th, 2007, the prices of gold and silver hiked. In the 2004 elections, however, the prices of gold and silver slightly declined during the elections' week. As I have noted in the precious metals weekly outlook, besides the U.S presidential elections, there are several other events that will unfold this week that could affect the bullion market. These events include: Euro-group meeting, ECB rate decision, U.S. trade balance report, MPC and RBA rate decisions, and U.S. jobless claims. On today's agenda: Australian Trade Balance, G20 Meeting, U.S. ISM Non-Manufacturing PMI and FOMC member Williams Speech.

On Friday, Gold tumbled down by 2.35% to $1,675; Silver also fell by 4.31% to $30.86. During last week, gold decreased by 2.14%; silver, by 3.67%. Furthermore, on Friday the SPDR Gold Shares (NYSEARCA:GLD) also declined by 2.01% and reached by November 2nd 162.6.

As seen below, the chart presents the changes in the normalized prices of precious metals during the past couple of weeks (normalized to 100 as of September 28th). During recent weeks, both gold and silver have had a downward trend.

On Today's Agenda

  • U.S. ISM Non-Manufacturing PMI: According to the previous report, during September the index rose to 55.1% - this means the non-manufacturing is growing and at a faster rate than in the previous month; this index may affect the prices of gold and silver;
  • G20 Meeting: the G20 will convene for two days in order to converse about the recent global developments and might also include the EU debt crisis and finding ways of solving it;
  • Australian Trade Balance: In the previous update regarding August, the seasonally adjusted balance of goods and services expanded its deficit to $2,027 million. The export of non-monetary gold declined by $2 million; if the gold exports will continue to drop in September, it might suggest a decline in demand for non-monetary gold (see here last report);
  • FOMC member Williams Speech: FOMC member Williams will give a speech in the University of California; the title of the speech is "Unconventional Monetary Policy".

Currencies / Bullion Market - November Update

The euro/USD declined on Friday by 0.86% to 1.2832. During last week, the euro/USD fell by 0.83%. Further, some currencies such as Aussie dollar also depreciated during last week against the USD by 0.36%. The correlation between gold and Aussie remains mid-strong and positive: during the past several weeks, the linear correlation between gold and AUD/USD reached 0.48 (daily percent changes); the linear correlation between the gold and euro/USD was 0.64 (daily percent changes). Last week's downward trend of the euro and Aussie dollar (against the USD), may have contributed to the downward trend in bullion. Thus, if the euro and other risk currencies will continue their descent against the USD, they are likely to pull down gold and silver.

Daily Outlook

The prices of precious metals declined during last week, and may continue this downward trend during this week. The U.S. presidential elections could affect the volatility in the prices of major commodities and thus there might be sharp swings in the prices of commodities in the next several days. If the ECB or RBA decide to cut again their respective cash rate, this could adversely affect the euro, Aussie -manufacturing PMI will rise again it may pull down the prices of gold and silver. Finally, if the euro and other "risk currencies" will continue their decline against the USD, then they are likely to pull down precious metals.

For further reading see" Gold and Silver Outlook for November"

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.