Gold And Silver Outlook For Nov. 19, 2012

Includes: GLD, SLV
by: Lior Cohen

Gold and silver changed direction again and slightly declined during last week. Despite the sharp shifts in the prices of gold and silver in recent weeks, they have moved with an unclear trend. Will gold and silver bounce back this week? As I have written in the precious metals weekly outlook, there are several events and reports that may affect precious metals prices. These items include Bernanke's speech, U.S housing data (existing-home sales, building permits, and housing starts), and the Eurogroup meeting. On today's agenda: U.S. existing-home sales, the minutes of RBA's monetary policy meeting, and the Bank of Japan monetary policy meeting.

On Friday, the price of gold edged up by 0.05% to $1,714.7; the price of silver, on the other hand, declined by 0.92% to $32.37. Last week, gold decreased by 0.92% and silver by 0.71%. Furthermore, SPDR Gold Shares (NYSEARCA:GLD) also decreased by 1.16% last week, and reached 165.88 by Nov. 16.

As seen below, the chart presents the developments in the normalized prices of precious metals during the past several weeks (normalized to 100 as of Oct. 18). Despite the sharp shifts in the prices of precious metals during recent weeks, they are currently close to their level from nearly a month ago.

Click to enlarge image.

On Today's Agenda

U.S. existing-home sales: In last month's report referring to September, the number of homes sold declined to a seasonally adjusted annual rate of 4.75 million. If this trend continues, it may create a pullback in the USD.

Minutes of RBA's monetary policy meeting: The minutes of the recent monetary policy meeting of RBA may reveal the main reasons behind the board's decision to leave the basic interest rate at 3.25%. The minutes of this meeting may also affect the Australian dollar and consequently commodities, such as gold.

Bank of Japan monetary policy meeting: Bank of Japan will decide on its monetary policy for December. As of last month, BOJ kept the interest rate unchanged at 0% to 0.1%, and hasn't expanded its stimulus plan. If the BOJ introduces a new monetary stimulus plan, it could affect a further pull down in the yen against the USD, and thus may also affect other currencies pairs and prices of commodities.

Currencies/Bullion Market -- November Update

The euro/USD decreased on Friday by 0.31% to 1.2743. During last week, the euro/USD rose by 0.26%. Conversely, some currencies, such as the Aussie dollar, depreciated during last week against the USD by 0.46%. This mixed trend might have contributed to the low volatility in the bullion market during last week. The correlations among gold, the euro, and the Aussie slightly weakened in recent days, but they are still mostly strong and positive. During the past several weeks, the linear correlation between gold and AUD/USD reached 0.43 (daily percent changes); the linear correlation between the gold and euro/USD was 0.45 (daily percent changes). Thus, if the euro and other risk currencies change direction and trade up against the USD, they are likely to pull up gold and silver.

Daily Outlook

The prices of gold and silver slightly declined during last week, but they might change direction and rally this week. This trading week is shorter on account of the Thanksgiving holiday. This could also lead to low trading volume, which could raise the volatility. If the Eurogroup meeting results in approving the next Greek bailout, it could pull up the euro. If Bernanke's speech offers some insight regarding the future steps of the FOMC in the next meeting (to be held in mid-December), it could affect precious metals. My guess, however, is that the speech won't offer additional information about the future steps of the Fed. If BOJ expands its asset purchase plan, it could further weaken the yen. If U.S. housing data shows additional growth, it could pull back precious metals. Finally, if the euro and other "risk currencies" rally against the USD, then they are likely to positively affect precious metals.

For further reading, see" Gold And Silver Outlook For Nov. 19-23."

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.