Last week, gold and silver prices continued their downtrend even though metals had started the week on a positive note. Their fall coincided with the weakness of leading currencies such as euro and the Aussie that depreciated against the stronger USD during last week. Following the release of the U.S non-farm payroll report, in which 195k jobs were added, more investors now believe that the Fed may taper QE3 in September or December 2013; this will slow down the growth of U.S money base and consequentially further lower the demand for gold and silver as safe haven investments. The next FOMC meeting scheduled for the end of the month will shed some light on this issue. Moreover, during last week, ECB and BOE left their respective cash rates unchanged. The ECB president and BOE governor hinted that they may keep rates low or slash them in the coming months. These headlines were enough to pull down the euro and pound against the USD. This week’s key event for metals will be Wednesday’s double whammy, with Fed Chairman Bernanke speaking and the release of FOMC minutes from its June meeting. This morning gold has added a few dollars to trade at 1219.26 as traders are buying on the cheap after gold tumbled to recent lows. Silver is following in the shadow of gold adding 62 pips to trade at 18.79. Silver got an extra bump by stronger US data, which helps increase the demand for the industrial metals.
Based on upcoming events and latest developments, gold and silver prices might further fall this week after Wednesday events. The sharp decline of both gold and silver prices at the end of the week might lead to a correction at the beginning of the week, but the general downward trend may persist. The upcoming publication of the FOMC meeting and Bernanke’s speech could affect precious metals markets if either of these events could shed some light on the Fed’s future plans. I suspect the upcoming minutes won’t stir up the markets since many wait for the September or end of the year FOMC meeting, in which the Fed may decide to taper QE3. Until then, the ongoing developments in the U.S economy could influence traders as to the future plans of the Fed.
Base metal futures are seen trading down this week, as release of upbeat US non-farm payrolls data has raised fear in the market that the Federal Reserve might taper its bond purchase program soon.
The rise in the dollar index after encouraging US data is also expected to build downward pressure on base metals. Copper futures extended their earlier losses on Friday, falling by more than 2% after a better-than-expected reading on the U.S. labor market. Copper is sensitive to shifts in the economic outlook because of its widespread use in many industries. A stronger U.S. economy could spur the Federal Reserve to curb its stimulus. The central bank’s easy-money programs have supported prices of copper and other commodities. Copper is trading at 3.0811 adding 11 pips this morning. Copper futures had traded at about $3.10 a pound ahead of the report. Prices slumped early on Friday, catching up with Thursday’s losses in other copper markets