Gold and silver prices started the second week of 2012 with light changes as gold price moderately declined and silver price slightly rose. Currently, gold and silver are traded up. Some attribute the current rally to speculation of rising demand for precious metals. According to a recent Federal Reserve report, consumer credit is on the rise; this news might indicate that U.S. households are more willing to borrow funds and consequently might affect not only the stock markets but also commodities and precious metals markets. Today, China’s trade balance report will be published.
Here is a market outlook of precious metals prices for today, January 10th:
Gold and Silver Prices –January Update
Gold price slightly decline on Monday by 0.54% to $1,608.1; silver price on the other hand moderately inclined by 0.35% to reach $28.78. In the chart below are the normalized gold and silver prices of recent weeks (gold and silver prices are normalized to December 23rd). During January, gold price rose by 2.6% and silver price by 3.1%.
The ratio between gold and silver prices declined on Monday, January 9th and reached 55.87. During January the ratio slightly decreased by 0.5% as silver price has slightly outperformed gold price.
On Today’s Agenda
China’s Trade Balance: according to Reuters China’s trade surplus will reach a four month high of $21.6 billion, but during 2011 China’s surplus has shrunk to $160 billion; if this trend will continue it could indicate that China’s economic growth is slowing down;
Forex Trading / Gold & Silver Prices – January
The Euro to U.S Dollar changed direction and slightly rose on Monday by 0.38% to reach 1.2765; other forex exchange rates such as the Australian dollar also appreciated against the U.S dollar. If major currencies will continue to appreciate against the U.S. dollar, it may also pressure up gold and silver prices. Currently, the Euro/USD is traded moderately up.
U.S. Treasuries / Gold & Silver Prices – January
The U.S. 10-year Treasury yield remained unchanged on Monday at 1.98%; during January the 10 year treasury yield rose by 0.09 percent point. This upward trend might indicate that the risk appetite in the markets has inclined. This rise in the U.S. LT yields may have also been stem from the recent Federal Reserve report showing consumer credit surged the most in a decade. Furthermore, as seen in the chart below, during December and January there were strong positive correlations among the daily percent changes of U.S. 10 year notes yield and gold and silver prices (in January, 0.901 and 0.833, respectively). If the LT U.S. treasury yield will further rise, it may also continue to pressure up gold and silver prices.
American Stock Markets / Gold & Silver Prices – January
The S&P500 index slightly rose on Monday by 0.23% to 1,280.70. During January, S&P500 index inclined by 1.84%. As presented in the chart below, the S&P500 index is still strongly and positively correlated to gold price (during January the linear correlation was 0.843 with gold prices and 0.991 with silver prices); thus if the stock market will continue to rally, this may also indicate that gold and silver prices are likely to follow and incline as well.
Current Gold and Silver Prices January 10th
The major precious metals are currently traded up in the European markets:
Current gold price per ounce short term future (February 2012 delivery) is traded at $1,623.70 per t oz. a $15.6 or 0.97% increase as of 09:00*.
Current silver price per ounce short term future (February 2012 delivery) is at $29.29 per t oz – a $0.508 or 1.76% increase as of 09:01*.
(* GMT)
Gold and Silver Prices Outlook
Gold and silver prices started off the week with light changes, but as the week will progress the forex and commodities markets will probably start to shift more sharply. This may be prompted by the upcoming ECB rate decision and the major U.S. reports to be published. Today, since there are few reports to be published, I speculate gold and silver prices will probably continue to zigzag around an upward trend as was the case in the past couple of weeks; the precious metals prices will be directed by the changes in the forex, U.S. treasuries and American stock markets as indicated above.
Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):
Today
China’s Trade Balance
FOMC Members Speak
Tomorrow
09:30 – Great Britain Trade Balance
15:30 – EIA Crude Oil Market Report
3:30 – Chinese CPI
For further reading: