Over the last week, between November 3d and 7th, both gold and silver went steeply lower before rebounding sharply on Friday 7th. For now, this seems to be a V-bottom on the making, like the U.S. stock indexes did mid-October of this year. Mind the next few days are key as there MUST be follow-through to the upside, otherwise the V-bottom will be invalid.
Over the last two weeks, when both gold and silver started to move sharply down, the primary driver has been the US dollar, which has surged higher following last week’s hawkish FOMC statement and increasingly more dovish central banks elsewhere in G10. The Bank of Japan’s surprise decision to expand its asset purchases program last week was followed by a dovish European Central Bank meeting on Thursday. At the follow up monthly news conference, Mario Draghi said the ECB is prepared to act more aggressively to combat deflation threats if needed and that the policy makers were unanimous on this view. He also said that the ECB’s Governing Council expects the central bank’s balance sheet to reach the early 2012 levels, implying an increase of up to €1 trillion. The net effect of the BoJ and ECB announcements has been positive for not only the US dollar, but also the global equity markets. Thus this has weighed on safe-haven demand.
For the week commencing November 10th, there are some key economic data coming both from the U.S. and European Union. There is only one formal Central Bank statement expected, i.e. one from Governor Mark Carney in the UK on Wednesday; he will talk about the quarterly inflation report. Mainly the data on Friday have the potential to cause some moves in the markets and metals.