Gold and Silver – Daily Outlook for October 18th

Gold and silver prices continued their rally and spiked yesterday. In the forex market the USD sharply depreciated against leading currencies including Euro and Aussie dollar. Despite the deal that was struck between GOP and Obama regarding the debt ceiling and opening the government, the uncertainty in the markets remain high: the deal is only temporary as the government will remain open until January 15th and the debt ceiling will expire by February 7th. This short term deal could also change the Federal Reserve policy and instead of tapering QE3 at the end of 2013 or early 2014, it could further postpone it. Moreover, if U.S economy continues to show little signs of progress this could also contribute to the Fed’s decision of keep purchasing $85 billion a month of long term bonds. In China, Dagong downgraded U.S credit rating. This could also be something that moved the markets and pressured down the USD, considering that China is the biggest foreigner creditor of the U.S. China’s GDP in the third quarter grew by 7.8% – slightly faster than earlier this year. This news may have also pulled up commodities prices. Finally, in the U.S jobless claims slightly fell by 15k to reach 358k; Philly fed index inched down from 22.3 in September to 19.8 in October. Will gold and silver change direction and correct for yesterday’s sharp rise? On today’s agenda: Bank of Japan’s Kuroda Speaks and Canada’s core CPI.

Here is a short overview for precious metals for Friday, October 18th:

Gold and Silver Prices Review – October Update   

On Thursday, gold spiked by 3.17% to $1,322.7; silver also sharply rose by 2.64% to $21.90. During October, gold decreased by 0.31%; silver slightly increased by 1.01%. In the chart below are the normalized prices of precious metals for 2013 (normalized to 100 as of September 30th). The prices of gold and silver have bounced back from their fall earlier this month.

Gold and silver Chart 2013  October 18The ratio between the two precious metals rose on Thursday to 60.39. During October, the ratio decreased by 1.31% as silver has slightly out-performed gold.

Gold  to silver ratio Chart 2013  October 18

The gold and silver futures volumes of trade have risen on Thursday to 219 thousand and 61 thousand, respectively. These numbers are relatively high for the month. If the volume remains elevated today, this could suggest the odds of sudden sharp changes in the prices of gold and silver due to high volume will increase. The chart below shows the volume of trading gold and silver futures in the CME in recent weeks.

volume Gold & silver prices 2013  October 18On Today’s Agenda

Bank of Japan’s Kuroda Speaks: Bank of Japan Governor will give a speech. Kuroda’s words could influence traders especially considering the recent weakening of Japanese yen in previous weeks;

Canada‘s core CPI: This report refers to the CPI and core consumer price index (controlling the volatile components such as energy, fruit and vegetables) for September 2013. According to the latest Canadian CPI update for August, the core CPI slightly rose by 0.2%. This report might affect the Canadian dollar, which is tends to be strongly correlated with precious metals prices;

Currencies / Precious Metals– October Update

On Thursday, the Euro/ USD currency pair sharply rose by 1.04% to 1.3675. During October, the Euro/USD rallied by 1.39%. Further, other currencies such as the Canadian dollar and Aussie dollar slightly appreciated yesterday against the U.S dollar by 0.38% and 0.88%, respectively. The correlations among gold, silver and Euro strengthened in the past couple of weeks, e.g. the correlation between the Euro/USD and gold price is 0.54 during October.

Correlation Gold and EURO USD 2013 October 18

Here is a reminder of the main events and publications that are scheduled for today and tomorrow (all times GMT):


Tentative – Bank of Japan’s Kuroda Speaks

13:00 – Canada’s core CPI

For further reading: