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Precious Metals Fundamental Analysis – August 17 – August 21, 2015 Forecast – Gold, Silver & Platinum

James Hyerczyk
Weekly December Comex Gold
Weekly December Comex Gold

Analysis and Recommendations: 

The precious metals complex rallied last week on safe haven buying fueled by three currency devaluations by the People’s Bank of China. The markets were also supported by growing speculation that the Federal Reserve would now postpone raising interest rates in September in response to China’s surprise decision to devalue the Yuan by 4.4 percent, the biggest drop in decades. 

For the week, December Comex Gold finished up 1.89%. September Comex Silver rose 2.46% and October NYMEX Platinum posted a 3.16% gain. 

While the move by China was aimed at making its currency more market-oriented, it fueled safe-haven buying in the precious metals because it raised doubts that the already slowing economy was in deeper trouble than previously thought. The volatile price action in the currency markets also prompted questions about whether Chinese officials can manage the current economic slowdown. 

Adding to the possibility of future uncertainty and volatility, Chinese officials defended the devaluation, saying that the currency had not entered a free fall. The People’s Bank of China also left the possibility of future devaluations on the table. 

By devaluing its currency now, China has also helped its exporters, whose goods will become relatively cheaper for overseas buyers. By the end of the week, the turmoil that drove the metals higher had subsided, encouraging profit-taking. Precious metals prices could fall further next week if China refrains from further devaluations. This is because weakening the Yuan will hit exporters to China hard by crimping the dollar-buying power of Chinese importers. 

China is one of the world’s biggest importers of metals and other commodities. It accounts for 45 percent to 50 percent of global metals demand so a weaker Yuan also makes gold, silver and platinum more expensive to import. 

While speculators were primarily focusing on gold and silver, platinum was being supported by budding optimism that this year’s price slide will encourage more demand from carmakers and jewelers. Increasing car sales in Europe could help underpin prices over the near-term because Europe accounts for about 25 percent of global use of the metal. In China, platinum imports in June climbed 43 percent from May, snapping two months of declines. We’ll have to watch this report going forward to see if the devaluation put a dent in growing Chinese demand. 

The combination of oversold technical conditions and the surprise devaluations by China may have awoken a sleeping giant. If anything, traders should expect increased volatility because no one is certain when or if China will devalue again. There are reports that besides the devaluation, it was aggressively intervening in the foreign exchange markets in an effort to prop up its currency. Rumors were also circulating that China aims for a 10% devaluation before it is done. Officials denied this rumor. 

This week, traders should be prepared to trade both side of the markets and to expect above average volatility. 

FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more up to the data analysis and information in our weekly reports.

Weekly December Comex Gold

 

Weekly October Platimum

 

Weekly September Comex Silver

Major Economic Events for the week: 

          Date                        Time             Curr                          Events                                                                 Forecast Previous

Mon Aug 17

 8:30am ET

USD

 

Empire State Manufacturing Index

   

5.0

3.9

 

Tue Aug 18

8:30am ET

USD

 

Building Permits

   

1.21M

1.34M

 
   

USD

 

Housing Starts

   

1.20M

1.17M

 

Wed Aug 19

8:30am ET

USD

 

CPI m/m

   

0.2%

0.3%

 
   

USD

 

Core CPI m/m

   

0.2%

0.2%

 
 

10:30am ET

USD

 

Crude Oil Inventories

     

-1.7M

 
 

2:00pm ET

USD

 

FOMC Meeting Minutes

         

Thu Aug 20

2:45am ET

USD

 

FOMC Member Williams Speaks

         
 

8:30am ET

USD

 

Unemployment Claims

   

272K

274K

 
 

10:00am ET

USD

 

Philly Fed Manufacturing Index

   

7.2

5.7

 
   

USD

 

Existing Home Sales

   

5.45M

5.49M

 

Fri Aug 21

9:45am ET

USD

 

Flash Manufacturing PMI

   

53.5

53.8

 

 

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