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

GOLD HOVERING AROUND QE3

Last week precious metals edged down. But this week the Euro and the dollar played a different game for gold.


ECB President’s statement about doing “whatever it takes” to preserve the Euro had resulted in a rise in the Euro for a second consecutive day which in turn gave support to gold. Gold rose by 0.44% to $1,619.8; Silver edged down by 0.07% and reached $27.45. During July, gold increased by 0.44% while silver slipped by 0.6%.


Most major commodities also rose during Wednesday’s trading: crude oil prices including WTI and Brent oil traded up; gold and silver prices didn’t do much as gold increased while silver edged down


Apart from the recovery of the Euro, gold got a mid weak support from the Fed news that came up. The potential from more liquidity and easing measures by the FED led to this rise.


Gold futures pared gains in the US on Thursday after a larger-than-expected drop in US unemployment claims slightly dampened the market's expectations for additional quantitative easing (QE3) from the Federal Reserve. US Labor Department reported that unemployment claims last week fell to a 353,000, down from a revised 388,000 the previous week. This marks the sharpest week-on-week decline since February 2011.

Gold surged to another new 3-week high, probing above the 100-day moving average (1615.12) for the first time since April. Moreover, the weaker dollar too lent support to gold. A softer dollar tends to underpin all commodities by making them cheaper in other currencies, plus some market participants tend to buy gold as a hedge against dollar weakness.

Gold prices strengthened further at the domestic bullion market on Thursday amidst good jewellery buying also influenced by higher global trend. Onset of the festive season saw increase in demand for gold in the Indian market.

Markets in general seem once again to have latched on to the notion that central bank actions are the only viable catalyst to take them higher. They rise and fall as expectations of further easing wax and wane. The better than expected US data make it less likely that the Fed will act, so markets retreat.