Gold And Silver Outlook For March 11, 2013

Includes: GLD, SLV
by: Lior Cohen

The prices of silver and gold rose slightly during last week. The main financial events last week including: the ECB press conference, in which ECB President Mario Draghi maintained his optimism regarding the progress of the EU, and the sharp rise in U.S employment during February, didn't seem to affect precious metals prices. Will gold and silver continue to trade up this week? As I have stated in the latest precious metals weekly outlook, several reports, summits and decisions may affect precious metals prices. These items include: U.S consumer price index, U.S PPI, U.S consumer sentiment, Australia's employment report, U.S retail sales, and U.S jobless claims. On today's agenda: French Industrial Production, China's New Loans, and Minutes of Bank of Japan Monetary Policy.

On Friday, the price of gold inched up by 0.11% to $1,576.9; Silver also increased by 0.49% to $28.92. During the month, gold inched down by 0.05%; silver increased by 1.86%. Moreover, during last week, the SPDR Gold Shares (NYSEARCA:GLD) edged up by 0.18% and reached by March 8th 152.71.

In the chart below are the normalized rates of gold and silver between January and March (normalized to 100 as of December 31st). The prices of gold and silver remained virtually unchanged in the past couple of weeks.

On Today's Agenda

French Industrial Production: The upcoming report will refer to February. In latest update, the industrial production edged down by 0.1% during January;

China's New Loans: This report will refer to the recent developments in China's new loans. According to the recent update, the total loans increased compared to the previous month;

Bank of Japan - Monetary Policy Minutes: Bank of Japan will come out with the minutes of the recent monetary policy meeting and rate decision. In the rennet meeting, BOJ decided to keep its asset purchase program unchanged. The minutes could offer some insight behind the recent monetary policy meeting and could affect the Yen;

Currencies / Bullion Market - March Update

The Euro/ USD sharply fell on Friday by 0.78% to 1.3005. During last week, the Euro/USD inched down by 0.13%. Conversely, several currencies such as the Aussie dollar slightly appreciated during last week against the USD by 0.32%. The mixed trend in the currencies markets may have moderately contributed to the little movement of precious metals prices. Nonetheless, the correlations among gold, Canadian dollar and Aussie dollar have sharply weakened in recent days: during February/March, the linear correlation between gold and USD/Yen fell to -0.25 (daily percent changes); the linear correlation between the gold and AUD/USD slipped to 0.15 (daily percent changes). These weak correlations might suggest the recent rally of gold and silver rates had little to do with the daily shifts in the foreign exchange markets. Nonetheless, if leading currencies will continue to depreciate against the USD, they might adversely affect gold and silver.

Daily Outlook

Prices of gold and silver slightly increased during last week. The appreciation of the U.S dollar against major currencies including Euro, Yen and Canadian dollar may have slightly curbed the modest rally of precious metals. The GLD ETF keeps cutting back on its gold holdings. Since the beginning of the month the holdings fell by sharpest rate in recent years. This could serve as another indication for the drop in demand for precious metals as investments. Moreover, the rise in long term treasuries securities yields is another indication for a shift in market sentiment from bearish to bullish. If this trend will continue, it might also pull down in the process precious metals prices. This week, several reports in the U.S will come out including: retail sales, CPI, PPI, consumer sentiment and jobless claims. They could affect not only the US dollar but also precious metals prices. If the U.S economy will keep showing signs of growth, it could pull up the USD and thus adversely affect precious metals prices. If the inflation (measured by CPI and PPI) will remain contained, this could lower the demand for gold and silver as safe haven investments against a potential devaluation of the USD.

For further reading: Why Gold Isn't Pulling Up?

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.