Gold prices increased last week, as the US dollar extended its gains to reach the highest level in seven weeks on mounting fears the European debt crisis is worsening, after Germany witnessed one of its worst Bund auctions since the inception of the Euro, while yields on Italian bonds rose last week above 7%, a level that forced Greece, Ireland, and Portugal to seek bailouts, and yields on Spanish bonds also rose last week, which raised fears that the debt crisis is spreading into major economies within the euro zone area.
Meanwhile, economic data from the United States generally showed worse than expected conditions, where GDP fell below projections, as the US economy expanded in the third quarter by 2.0%, down from 2.5% in the prior estimate, while the income report showed that spending levels expanded at a moderate pace ahead of the holiday season, which raised concerns over the outlook of the world’s largest economy.
Europe will be very much the focus next week, where traders will be eyeing new developments on the European debt crisis, where Italy and Spain, the third and fourth largest economies in the euro zone area, are facing mounting pressures from the debt crisis, and the uncertainty that is surrounding the outlook continues to weigh down on confidence.
Traders will be eyeing the EU Finance Ministers meeting next week, where they will discuss the recent developments regarding Greece, and most likely Italy, and the European Financial Stability Facility fund. Moreover, traders will be eyeing bond auctions in Italy, France, Belgium, and Spain. Accordingly we should expect high levels of fluctuations in markets.
Important data will be released from Europe and the United States next week, where the ISM manufacturing index is due next week. Nonetheless, the main focus will be the employment data, as investors will be first eyeing the ADP employment report on Wednesday and after that their attention will shift to the US jobs report, which is due on Friday.
We continue to expect that gold prices will rise over the coming period, however, we also expect volatility to continue to dominate gold prices over the short term, as despite the recent improvement in overall conditions, yet risks are still threatening the progress of improvement, especially as the outlook for global economies remains full of uncertainty. We also expect Europe to continue to dominate the headlines next week, where developments in France, Italy and Spain should dominate the sentiment in markets.
Complied by Mitesh Rasaikar, CEO (Marketing & Finance), Maya Iron Ores
