As we progress away from January, the worst performing month for gold and silver prices as the average monthly spot gold price fell by 2.5% compare to December, it’s high time to analyze the performance of gold during that month.
The last time gold prices declined by such as rate was back in July 2010.
Since then, traders are use for spot gold price to rise with no apparent decline, and thus the slow performance during January caught many by surprise.
Let’s check exactly how gold spot price and silver prices performed during that month:
In the following chart is the behavior of gold and silver prices during January 2011, in which both precious metal prices are normalized to the beginning of the month 3/1=100.
The chart above clearly shows a downward trend for these metal prices during the month.
In the table below is a summary of the correlations of daily percent changes among spot gold price, silver prices and major currencies, for the month of January:
I have also added below the graph of the currencies and gold price accumulated percent change during January.
Both of the charts above show the strong correlation among gold USD/YEN and AUD/USD. On the other hand, these correlations are smaller (in absolute figures) than the correlations registered during December. This might shed some light on the decline in the precious metals markets.
Since there is a very strong correlation (0.9) between the daily percent changes of silver prices and spot gold price, these correlations are also very similar to the correlations found among silver prices and these major currencies.
February’s bounce back
Despite the sharp decline in gold and silver prices during January, it didn’t bother many investors to continue to hoarding more gold, as reported by Bloomberg, in which investors still own gold worth 102 billion USD. This represents more gold than the US can mine in 12 years.
Up to now, gold price rose by 1.8% and silver prices increased by 5.6%. This recent rises could set to tone for the rest of the month.
This only goes to show that the “hot money” of speculators probably drive gold and silver prices up and will continue to do so until something will convince investors to push their money somewhere else as gold and silver are too high.
For further reading (in this site):
- Is gold a safe haven investment compare to S&P500
- 3 reasons not to rely on the S&P500/oil price relation – January 25
- The tightening of Silver & Gold prices – short analysis
- Monthly recap on Gold prices & Silver prices for December 2010
Yearly Analysis and Outlook: