GOLD OUTLOOK REMAINS POSITIVE IN THE MEDIUM TERM

The month of August began with a downfall for precious metals. Bullions rates didn’t do much as both gold and silver prices scaled down. Other commodities like oil and US stock markets declined too.

Precious metals were seen hovering around the declaration of results of the FOMC meeting that concluded on Wednesday.

Gold Prices fell below $1600 an ounce Wednesday afternoon in London, reversing the gains of the last week, following better-than-expected US jobs data. Silver Prices meantime dropped as low as $27.21 an ounce – also back to where they were last week.

However, after the weeks downfall, gold and silver managed to edge up by Friday.

Gold for December delivery advanced $18.60, or 1.2%, to settle at $1,609.30 an ounce on the Comex division of the New York Mercantile Exchange. The metal declined 0.5% on the week, however. Silver for September delivery rose 81 cents, or 3%, to settle at $27.80 an ounce. Silver rose 1.1% on the week. A strong nonfarm payroll report combined with a positive ISM Services print supported the day's gains. Nonfarm payrolls came in at 163K versus the expected 100K while nonfarm private payrolls added 172K against expectations of a 105K increase. The unemployment rate of 8.3% ticked up from its previous reading of 8.2%. 

Lower dollar adds further glaze Bullion metal prices ended higher at Comex on Friday, 03 August 2012 snapping a three-day losing streak after U.S. employment data showed a rebound in hiring last month and as the dollar traded weaker

The Fed said during the FOMC statement that it will continue swapping $667 billion of short-term debt with longer-term securities to lengthen the average maturity of its holdings, an action named ‘Operation Twist’. The central bank will also continue reinvesting its portfolio of maturing housing debt into agency mortgage-backed securities. The Fed left unchanged its statement that economic conditions would likely warrant holding the benchmark Fed funds rate near zero “at least through late 2014.”

Given the active central bank calendar, every fresh data point will be analyzed for how it might affect the likelihood of additional stimulus programmes. According to Wednesday’s ADP Employment report the US economy added 163,000 private sector nonfarm jobs in July – over a third more than the consensus forecast among analysts. It is therefore not surprising that gold dipped after the release of mostly positive US macroeconomic reports over the past 24 hours.

The FOMC meeting will be followed by the meetings of European Central Bank of England on Thursday, where all analysts are eyeing on more stimulus following by a declaration made by ECB president last week.

Mario Dargi told in a meeting in London , last week, that the ECB stood ready to do whatever it takes to save the euro, which means that the banks is preparing to re enter the bond markets.

Asian markets too traded with a negative bias on Wednesday mainly on the back of weak manufacturing data from china, which expanded at the slowest pace in eight months

The outlook for precious metals in the medium-term, however, remains positive because the central banks will have to undertake an expansive monetary policy sooner or later. They are just waiting for the right time; they don't want to use the last cartridge too soon