Gold and silver slightly rose during last week. Their rally coincided with the recovery of other commodities such as oil and leading “risk related currencies” such as Euro and Aussie dollar against the USD. Last week, the FOMC and ECB decided on any changes to their respective monetary policy. The ECB decided to cut its interest rate by 0.25pp to 0.5%. The FOMC kept its policy unchanged including its $85 billion a month asset purchase program. Nonetheless, the speculation around the next move of the Fed may have pulled bullion rates into different directions. The recent non-farm payroll report didn’t seem to stir up much bullion market despite its better than expected gain in employment. Will gold and silver continue to recover this upcoming week?
Herein is a short overview that outlines the main reports, speeches and events that may affect gold and silver next week between May 6th and May 10th.
Based on above and latest changes in the gold and silver markets, the prices of precious metals might continue to rise during the week and thus continue this recent correction. I still think that precious metals will resume their downward trend in the following weeks. If the upcoming financial reports including: China’s trade balance, Germany’s factory orders, Australia’s trade balance, and Canada’s employment report will show signs of growth, they could pull up gold and silver. If the RBA or BOE decide to cut their respective rates this could adversely affect their respective currency, and by extension also pull down commodities prices.
The recent FOMC meeting didn’t result in any big announcement as the policy remained unchanged.
The SPDR gold trust ETF holdings continue to fall: the ETF’s amount of gold held tumbled down by 15.3% since the beginning of March. If the holdings will continue to dwindle, they could indicate the demand for gold as an investment will keep falling. The CME’s decision on April 15th to raise the requirements for cash deposits on gold and silver contracts is likely to keep fueling the decline in demand for bullion for investment. The recovery of the Euro and Aussie dollar during last week may have also partly contributed to the rally of commodities prices. If these currencies will continue to appreciate against the USD, they might also pressure up precious metals.
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