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Guest Commentary: Gold & Silver Weekly Outlook 10.22.2012

Guest Commentary: Gold & Silver Weekly Outlook 10.22.2012

2012-10-22 12:44:00
Lior Cohen: Commodities Analyst at Trading NRG,
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Last week's EU Summit didn't ease the concerns of traders as Spain didn't request a bailout. Several U.S reports may have contributed to the decline in gold and silver prices: the Philly Fed index turned positive for the fist time since April; housing starts hiked by 15% during last month; U.S core CPI rose by 0.1% during September. During last week the Euro/USD rose by 0.56%; on the other hand, the CAD depreciated against the USD by 1.39%. The main events of the week will shift back to the U.S and will include the FOMC meeting and U.S third quarter GDP report.

The video report herein has an outlook of gold and silver for the main publications and events that may affect precious metals during October 22nd to 26th. Some of these reports include:

Wednesday – FOMC Meeting (Statement): The FOMC will convene for the seventh time this year and decide at the end of two day of session on any changes in its monetary policy and interest rate; Following last month's FOMC meeting, in which the FOMC announced of the launch of QE3, it seems unlikely that the Fed will introduce additional stimulus plan. The Fed might, however, hint of any future plans to intervene again the U.S financial markets. The FOMC statement may affect the US dollar and precious metals prices; I guess that even if the FOMC won't announce of additional monetary steps, but will only allude to its intention to do so in the near future, this news is likely to affect gold and silver;

Friday – First U.S GDP 3Q 2012 Estimate: This will be the first estimate of U.S's third quarter 2012 real GDP growth. In the recent estimate the U.S GDP during the second quarter expanded by 1.7%; in the 1Q2012 the GDP growth rate reached 1.9% (annual rate). This shows a fall in the growth rate for the US's GDP. If there will be a sharp shift in the growth rate from Q2 to Q3 this could affect not only the US dollar but also commodities prices.

In conclusion, I guess gold and silver will further decline during the upcoming week. Nonetheless, the upcoming FOMC meeting might have a strong positive effect on the bullion market mainly if the FOMC will announce or even just hint of new stimulus steps it considers in the near future. I still think the Fed won't make any big announcements. The upcoming reports regarding the U.S economy include the U.S GDP, core durable goods and home sales could pull down precious metals rates if these reports will show the U.S economy is expanding. This, in turn, could lower the chances of Fed introducing additional monetary in the near future. If China's flash manufacturing PMI report won't show any growth, this could adversely affect commodities. The ongoing depreciation of the Indian Rupee may have curbed the growth in demand for gold in India, among the leading countries in gold imports. Finally, if the Euro, Aussie dollar, and other exchange rates will change direction and fall against the USD, this could also adversely affect precious metals.

For further reading: Weekly Outlook Financial Markets for October 22-26

By: Lior Cohen, M.A. in Economics, Commodities Analyst and Blogger at Trading NRG

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