The prices gold and silver traded up in recent weeks (see chart below). There are speculations that quantitative easing 3 will be announced soon by the FOMC. Bernanke’s speech didn’t suggest, in my humble opinion, that QE3 will be implemented soon. There are also speculations around the future bond purchase program of ECB: in a closed testimony in the European Parliament ECB President, Mario Draghi, supposedly laid out his plan for his bond purchase program. If the ECB will announce of this program in the near future (there is a rate decision on Thursday) this could affect the Euro, which is positively correlated with bullion rates.
On today’s agenda: Reserve Bank of Australia – Cash Rate Statement, U.S. ISM Manufacturing PMI, and Australian GDP Second Quarter 2012.
Here is a short outlook for precious metals for Tuesday, September 4th:
Precious Metals –September Update
There wasn’t any trade yesterday at the CME due to an American Holiday, but in the Asian markets the price of gold and silver rose. On Friday, the price of gold increased by 1.84% to $1,687.6; Silver hiked by 3.27% to $31.44. During last month, gold increased by 4.52%; silver, by 12.64%.
As seen below, the chart presents the changes of normalized prices of precious metals in the last couple of weeks (normalized to 100 as of August 15th). During the last couple of weeks gold and silver had a steady upward trend.
The ratio between the two precious metals fell on Friday to 53.67. During August the ratio declined by 7.21% as silver under-performed gold.
Despite the different percent changes of gold and silver in recent days, the linear correlation of the two precious metal daily percent changes remains strong and robust, as indicated in the chart below. During August the linear correlation of their daily percent changes reached the highest level since May, which means the two metals’ relation has tighten in recent months.
On Today’s Agenda
U.S. ISM Manufacturing PMI: During July 2012 the index edged up to 49.8%, which means the manufacturing is still contracting; this index may affect forex, and bullion markets;
Reserve Bank of Australia – Cash Rate Statement: the overnight money market rate of Australia’s Reserve Bank remained unchanged at 3.5% – the lowest level since the end of 2009. If the RBA will decide to lower the rate this news may affect the Australian dollar that is strongly linked with commodities prices;
Australian GDP Q2 2012: In Q1 2012, the GDP expanded by 1.3% (seasonally adjusted). The slowdown in China’s growth might also adversely affect the growth of Australia’s GDP; if the growth rate will dwindle it could affect the Australia dollar (see here last report);
Currencies / Bullion Market – September Update
The Euro/ USD rose again on Monday by 0.11% to 1.2579. During last month the Euro/USD rose by 2.24%. Alternatively, other currencies including Aussie dollar depreciated on Monday against the USD by 0.72%. The linear correlation between gold and Euro is still strong and positive: during last month, the correlation between the gold and EURO/USD was 0.513 (daily percent changes). Therefore, if the Euro will continue to rise against the USD, it could also rally the prices of precious metals. Currently, the Euro/USD is trading up.
Current Gold and Silver Rates as of September 4th
Gold (October 2012 delivery) is traded at $1,697.4 per t oz. a $9.8 or 0.58% increase as of 05:58*.
Silver (October 2012 delivery) is at $32.255 per t oz – a $0.813 or 2.59% increase as of 05:58*.
Daily Outlook for September 4th
Precious metals traded up in recent weeks and they may continue this upward trend during this week. The renewed speculations around the future steps of the Fed vis-à-vis another quantitative easing plan rekindled the precious metals market. The recent speech of Mario Draghi also raised the speculations of bond purchase program that will help struggling countries such as Spain and Italy. Today’s publication of the Australian GDP, U.S Manufacturing PMI might have a modest effect on the Aussie dollar and USD, respectively. In such a case, these currencies could also affect the rates of gold and silver. If RBA will change its interest rate it could also affect the Aussie dollar which is strongly linked with bullion. Finally, if the Euro and other “risk currencies” will rise during the day they could contribute to the rally of precious metals prices.
Here is a reminder of the top events and publications that are scheduled for today and tomorrow (all times GMT):
05:30 – Reserve Bank of Australia – Cash Rate Statement
15:00 – U.S. ISM Manufacturing PMI
2:30 – Australian GDP Second Quarter 2012
Tentative – German 10 Year Bond Auction
14:00 – Bank of Canada’s Overnight Rate
02:30 – Australia Employment Report
For further reading: