The prices of precious metals changed direction a couple of times during the day but in the end they both slightly rose, despite the fall in other commodities prices and major “risk currencies” such as Euro or Aussie dollar. ECB kept its rate unchanged yesterday but it also lowered its projection for the Euro Area economic progress this year. ECB estimates the EU will contract by 0.5% during the year. This news may have contributed to the fall of the Euro. U.S jobless claims declined by 25k during last week and reached 370k. This news may have also helped appreciate the USD. Despite these news items bullion prices slightly rose yesterday. Currently, the price of gold is rising. On today’s agenda: U.S. Non-Farm Payroll Report, ECB President Speaks, Australian Trade Balance, Swiss National Bank Foreign Currency Reserve, German Industrial Production, UoM Consumer Sentiment and China’s CPI.
Here is a short outlook for precious metals for Friday, December 7th:
Precious Metals – December Update
On Thursday, the price of gold rose by 0.5% to $1,700.8; Silver price also increased by 0.46% to $33.06. During the month, gold declined by 0.59%; silver, by 0.44%.
In the chart below are the developments in the normalized prices of bullion during November and December (normalized to 100 as of October 31st). During recent weeks the price of silver slightly rose while gold price dwindled.
The ratio between the two precious metals edged up on Thursday to 51.45. During the week the ratio edged down by 0.15% as gold slightly under-performed silver.
On Today’s Agenda
U.S. Non-Farm Payroll Report: in October, the labor market expanded by a higher pace than expected: the number of non-farm payroll employment increased by 171k; the U.S unemployment rate edged up to 7.9%; if the upcoming report will continue to show growth of above 120 thousand (in additional jobs), this may lower the odds of the Fed introducing additional stimulus by next week’s FOMC meeting (see here my last review on the U.S employment report);
The table below presents the changes in U.S non-farm payroll, daily changes in USD/YEN, gold and silver prices on the day of the publication of the labor report. As seen, the prices of bullion tend to fall when the labor report is positive and shows growth,
Canada’s Employment Report: In the recent employment report for October 2012, unemployment remained at 7.4%; the upcoming update might affect the Canadian dollar;
Australian Trade Balance: In the previous report, the seasonally adjusted balance of goods and services expanded its deficit to $1,456 million in September. The export of non-monetary gold rose by $253 million; if the gold exports will continue to rise in October, it might suggest a rise in demand for non-monetary gold (see here last report);
Swiss National Bank Foreign Currency Reserve: The Bank will come out with its current Foreign Currency Reserve; according to the pervious report, the forex reserves slightly declined;
Great Britain Manufacturing Production: in the recent report for August the index edged up by 0.1% (M-2-M); this news may affect the British Pound;
ECB President Speaks: Mario Draghi will give a speech at the “Anchor Conference”. Following the ECB rate decision, if the ECB President will refer to the ECB monetary policy the speech might affect the Euro;
German Industrial Production: This report will pertain to the developments in the industrial production of the German for October; in the previous report the German industrial production declined by 1.8% (M-O-M) during September;
UoM Consumer Sentiment (preliminary): University of Michigan will publish its preliminary consumer sentiment update; in the recent report, the sentiment index increased again to 84.9;
China’s CPI: during September the Chinese inflation rate edged down again to an annual rate of 1.7%; this rate is below China’s inflation target of 4% in annual terms. If the inflation will continue to fall it could indicate that China’s economy isn’t expanding;
Currencies / Bullion Market – December Update
The Euro/ USD tumbled down on Thursday by 0.76% to 1.297. During the month, the Euro/USD slipped by 0.1%. On the other hand, some currencies such as Aussie dollar appreciated yesterday against the USD by 0.29%. The correlations among gold, Euro and Aussie are still mid-strong even thought they have weakened in recent days: during November/December, the linear correlation between gold and Euro /USD reached 0.33 (daily percent changes); the linear correlation between the gold and AUD /USD was 0.36 (daily percent changes). Thus, if the Euro and other risk currencies will continue to fall against the USD, they are likely to negatively affect gold and silver.
Current Gold and Silver Rates as of December 7th
Gold (short term delivery) is traded at $1,703 per t oz. a $1.2 or 0.07% increase as of 00:30*.
Silver (short term delivery) is at $33.09 per t oz – a $0.02 or 0.07% decrease as of 00:30*.
Daily Outlook for December 7th
The prices of gold and silver didn’t do much in recent days and only slightly declined during the month. Up to now the negotiations between House Speaker and President Obama didn’t lead to any new developments in tacking in multi-year budget negotiations. The recent news regarding the negotiations between is that they had another brief meeting. The upcoming reports including: U.S non-farm payroll report, Australian Trade Balance and German Industrial Production could affect the USD, Aussie dollar and Euro, respectively. If non-farm payroll report will show sharp gains, this news could lower the odds of the Fed intervening again in the financial markets and thus bring down gold and silver prices. Finally, if the Euro and other “risk currencies” will fall again against the USD, they are likely to pull down precious metals.
Here is a reminder of the top events and publications that are scheduled for today (all times GMT):
02:30 – Australian Trade Balance
09:00 – Swiss National Bank Foreign Currency Reserve
09:30 – Great Britain Manufacturing Production
10:00 – ECB President Speaks
11:00– German Industrial Production
13:30 – U.S. Non-Farm Payroll Report
14:55 – UoM Consumer Sentiment (preliminary
02:30 – China’s CPI
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