Gold and silver plummeted last week, mainly by the end of the week. The new around the decision of big investors such as Soros and Bacon to reduce their holdings in gold related investments may have contributed to the sharp shift in the direction of precious metals. In Europe, the news regarding the EU GDP, in which it had contracted by a sharper than expected rate, may have adversely affected not only the Euro but also commodities. The developments in the forex markets may have also had a moderate effect on precious metals. Following these developments, will gold and silver change course and rally or continue to trade down this week?
In the video report herein there is an outlook of gold and silver that include the main publications and events that may affect precious metals during February 18th and February 22nd. Some of these reports include:
Wednesday – U.S. Housing Starts: the U.S Census Bureau will come out with its U.S housing starts update for January 2013; this report was historically correlated with gold– as housing starts rise, gold tended to decline the following day; in the previous monthly report, the adjusted annual rate reached 954,000 in December 2012, which was 12.1% above November’s rate;
Wednesday – Minutes of January’s FOMC Meeting: Following the January FOMC meeting, in which the Fed left its monetary policy unchanged, the bullion market had a very short term reaction to this news – gold and silver prices increased on the day of the announcement only to tumble down the next day. The minutes of the latest FOMC meeting might add some insight behind the speculations around the future steps of the FOMC; the minutes might clarify the Fed’s course of action vis-à-vis the exit strategy for its current running QE programs. If the Fed will put a time limit or hint of changes in the expansion of its monetary policy, this could pull down bullion;
In conclusion, the speculations around the recent move made by big investors may have also influenced traders to cut their exposure. The forex markets weren’t too volatile to warrant such a sharp fall in bullion rates. Moreover, no big fundamental changes had occurred last week to explain this sharp fall in gold and silver prices. Therefore, if last week’s decline was mostly speculative, precious metals are likely to bounce back at the beginning of the week. On Friday, the trading volume of gold and silver spiked to 283k and 97k, respectively. These were the highest trading volumes since last month. If the gold and silver trading volume will further rise, this could augment gold and silver prices’ volatility.
The upcoming minutes of the recent FOMC meeting could raise the price volatility of bullion if the minutes will reveal some unexpected insight. My guess, however, is that gold and silver won’t react to this report. The upcoming reports regarding the U.S economy including: Philly fed index, housing starts, CPI, PPI and jobless claims, could affect the USD and precious metals prices: if these reports will show expansion in the U.S economy, they may adversely affect gold and silver.
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