Where Do Metals Go From Here?

This morning precious metals are trading in the red, with gold falling $4.40 to trade at 1333.80 and silver plunging 195 points to trade at 20.733. Even the slight geopolitical tensions generating from the Crimea as Russian troops fire on the border. Russian troops detained Ukrainian border guards at a base a day after gunmen fired warning shots at international observers and barred them from Crimea.

Last week the prices of gold and silver moved in an unclear trend. Their prices started off strong at the beginning of the week only to change course and plunge at the end of the week. Several U.S reports may have contributed to movement of precious metals: Non-farm payroll report showed a 175k increase in jobs during February; manufacturing PMI increased by 1.9 percentage points to 53.2. Finally, jobless claims fell by 26k to reach 323k.

The price of gold increased by 1.26% last week; moreover, during last week, the average price reached $1,343.70 which was 0.84% higher than last week’s average rate. Gold ended the week at $1,338.20.  The price of silver declined by 1.46%; further, the average weekly rate was $21.28 which was 1.32% below last week’s price. Several reports will be released this week: Retail sales, PPI, federal budget, consumer confidence, and jobless claims. If these reports show progresses in the U.S economy, they could further drag down the prices of precious metals.

Asian markets are trading on a negative note today on the back of unfavorable trade balance and inflation data from Chinese economy increasing concerns over the growth outlook for the world’s second largest economy. China’s Consumer Price Index (CPI) fell to 2 percent in February from 2.5 percent in January. Producer Price Index (PPI) plunged by 2 percent in February as against a fall of 1.6 percent in January. The US Dollar Index (DX) traded on a flat note last week on the back of rise in risk appetite in market sentiments in the earlier part of the week which led to decline in demand for the low yielding currency.

Gold and silver prices are expected to trade on a mixed note today on the back of recovery in gold ETF’s holdings will support an upside in the prices.

Base metals on the LME traded on a mixed note in the last week on the back of unfavorable factory orders and unemployment rate data from the US. Also, decline in manufacturing data from China which increased concerns over the demand for the commodity acted as a negative factor. Copper hit a recent low to close the week at $3.06 and continued to decline this morning falling to 3.031 its lowest price in several years. Weak Chinese trade data continues to weigh on the commodity even though imports of copper soared. Copper prices slumped by more than 3 percent last week taking cues from rise in unemployment rate in the US. Also, fall in manufacturing activity in the world’s biggest consumer, China coupled with more than forecasted decline in US factory orders data exerted downside pressure on prices.