The prices gold and silver continued their slow movements and edged up despite the sharp fall in the prices of other commodities prices such as crude oil or the deprecation of the Euro and other “risk currencies” during Tuesday. Will this detachment of bullion from the rest of the market continue? Currently the prices of gold and silver are rising. Bank of Japan announced it will expand its stimulus by 10 trillion yen (roughly $126 billion) to purchase T-bills and JGBs. This news is likely to help ease the concerns around the progress of Japan’s economy. This news may also positively affect commodities prices. On today’s agenda: Minutes of the last MPC Meeting, U.S. Housing Starts and Building Permits report, Japanese Trade balance and China’s flash Manufacturing PMI.
Here is a short outlook for precious metals for Wednesday, September 19th:
Precious Metals –September Update
On Tuesday, Gold edged up by 0.03% to $1,771.2; Silver also increased by 1.02% to $34.72. During the month, gold increased by 4.95%; silver, by 10.42%.
As seen below, the chart shows the changes of normalized prices of precious metals during September (normalized to 100 as of August 31st). During recent weeks gold and silver have had an upward trend.
The ratio between the two precious metals slipped again on Tuesday to 51.02. During September the ratio decreased by 4.95% as gold under-performed silver.
The rise in movement of both bullion rates is recent weeks is also reflected in a modest rise in the in precious metals prices’ volatility during the month: the standard deviations of gold and silver (daily percent changes) reached 0.91% and 1.82%, respectively. For silver, this standard deviation is the highest since April; for gold, this was the highest since July.
On Today’s Agenda
U.S. Housing Starts: this report was historically correlated with gold– as housing starts decreased, the price of gold tended to rise the next day (even when controlling to the U.S dollar effect); in the previous report, the adjusted annual rate reached 754,000 in July 2012, which was 1.1% below June’s rate;
U.S. Building Permits: The latest report building permits increased by 6.8% (M-o-M) in the adjusted annual rate of building permits and reached 812,000 in July 2012. If this report will continue to rise in the building permits rate, it may indicate that the U.S housing market (from this aspect) is pulling up (the recent U.S building permits update);
U.S. Existing Home Sales: in the last report regarding July the number of homes sold slightly increased: the seasonally adjusted annual rate of 4.47 million home sales; if this trend will continue it may help rally the USD;
China flash Manufacturing PMI: this survey covers 800 companies in 20 industries in China; according to the HSBC Manufacturing PMI flash report for August 2012 the Manufacturing PMI fell to 47.8, which means the manufacturing conditions are still contracting in China; if this negative index will continue, this may adversely affect commodities rates;
Minutes of MPC Meeting: in the previous MPC meeting it was announced the rate will remain at 0.5% and the asset purchase program at £375 billion; the MPC still has concerns about inflation. The minutes of the recent meeting might offer some insight behind the recent decision;
Japanese Trade balance: The Japanese trade balance deficit for July 2012 rose by 2.5% compared to June, and reach 325 billion YEN (roughly $4.11 billion) deficit (seasonally adjusted figures). This rise is due to the drop in imports by 0.9%, and a decline in exports by 1.1%. Japan is among the leading importing countries of gold;
Currencies / Bullion Market – September Update
The Euro/ USD declined again on Tuesday by 0.53% to 1.3048. During the month, the Euro/USD rose by 3.73%. Further, other currencies including Aussie dollar also depreciated on Tuesday against the USD by 0.2%. The linear correlation between gold and Euro is still mid-strong: during the month, the correlation between the gold and EURO/USD was 0.54 (daily percent changes). The relation between gold and Aussie dollar it’s 0.50. If the Euro will continue to trade down, this could also eventually drag down along with it the prices of bullion.
Current Gold and Silver Rates as of September 19th
Gold (October 2012 delivery) is traded at $1,774.7 per t oz. a $3.5 or 0.2% increase as of 23:17*.
Silver (October 2012 delivery) is at $34.86 per t oz – a $0.142 or 0.41% increase as of 23:19*.
Daily Outlook for September 19th
The prices of precious metals didn’t do much on the first and second days of the week as they have rose on Tuesday while major commodities and stock continued to fall. The anticipation of the Euro market that Spain will make the next move on the debt issue might be among the factors pulling down the Euro along with the rest of the markets. All awhile the Spain bond auction reveals the long term yields continue to rise. The speculations in Asia around the future move of People Bank of China e to stimulus the economy could keep affecting not only the forex markets but also commodities markets. The effect of the FOMC decision from last week is likely to keep having a lingering effect on the bullion market and keep rates high. The upcoming reports to come out regarding the minutes of the MPC meeting, U.S. housing market (existing home sales and housing starts reports), Japan’s trade balance and China’s manufacturing PMI could affect their respective currency if the reports will demonstrate a significant change as indicated above. Finally, if the Euro and other “risk currencies” will continue to decline, this could also adversely affect precious metals rates.
Here is a reminder of the top events and publications that are scheduled for today and tomorrow (all times GMT):
09:30 – MPC Meeting Minutes
13:30 – U.S. Housing Starts
13:30 – U.S. Building Permits
00:50 – Japanese Trade balance
03:30– China flash Manufacturing PMI
09:00 – Flash German, French and Euro Area Manufacturing PMI
09:30 –Retails Sales GB
Tentative – Spanish 10 Year Bond Auction
13:30 – U.S. Jobless Claims Weekly Report
14:30 – FOMC member Lockhart’s Speech
15:00 – Philly Fed Manufacturing Index
17:00 – ECB President Speech
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