The prices of precious metals remained nearly unchanged yesterday as gold edged down while silver slightly rose. U.S non-manufacturing PMI slightly rose in November to 54.7 compared to 54.2 in October. This means the non- manufacturing sectors are growing at a slightly faster pace. ADP estimated 118 jobs were added in November. If Friday’s non-farm payroll report will beat this number, it may pull down precious metals. In Australia, number of employed increased by 13.9k in November. This news may affect the Aussie dollar. Currently, the prices of gold and silver are rising. On today’s agenda: German Factory Orders, ECB Rate Decision (update: ECB left rate unchanged but lower the forcast for GDP and inflation), BOE Rate & Asset Purchase Plan, U.S. Jobless Claims (update: jobless claims reached 370k a drop of 25k) and French 10 Year Bond Auction.
Here is a short outlook for precious metals for Thursday, December 6th:
Precious Metals – December Update
On Wednesday, the price of gold edged down by 0.12% to $1,692.4; Silver price, on the other hand, bounced back by 0.53% to $32.91. During the week, gold declined by 1.08%; silver, by 0.89%.
In the chart below are the developments in the normalized prices of precious metals during November and December (normalized to 100 as of October 31st). During recent days the price of silver and gold declined.
The ratio between the two precious metals slipped on Wednesday to 51.43. During the week the ratio edged down by 0.19% as gold under-performed silver.
Despite yesterday’s the different directions gold and silver took, the linear correlation between these precious metal daily percent changes is still robust, as indicated in the chart below. During November/December the linear correlation of their daily percent changes reached 0.913, which means the two metals’ relation very strong.
On Today’s Agenda
BOE Bank Rate & Asset Purchase Plan: Bank of England will announce its basic rate for December and its updated asset purchase plan; as of November BOE kept rate unchanged at 0.5% and the asset purchase plan was kept at £375 billion; the ongoing economic slowdown in GB raises the odds of BOE to expand its bond purchase plan;
ECB Euro Rate Decision: Back in July the ECB decided to reduce its cash rate was back in July by 0.25p to 0.75%. ECB may cut its rate again for the following reasons: the economic situation in EU isn’t growing; the inflation isn’t rising and monetary development is dwindling; the Fed’s stimulus plan also pressures up the Euro; many EU banks continue to struggle. Thus, the ECB might decide to cut the rate by another 0.25pp. If ECB will cut the rate again, it may adversely affect the Euro;
U.S. Jobless Claims Weekly Report: in the previous report the jobless claims fell by 23k to reach 393k; this upcoming weekly update may affect the U.S dollar and consequently commodities;
French 10 Year Bond Auction: the French government will issue its monthly bond auction; in the previous bond auction, which was held during by the end of October, the average rate reached 2.22%;
German Factory Orders: This report will refer to the changes in the factory orders of Germany for October; in the previous report the German factory orders declined by 3.3% (M-o-M);
Currencies / Bullion Market – December Update
The Euro/ USD changed direction and fell on Wednesday by 0.19% to 1.3069. During the week, the Euro/USD rose by 0.64%. Moreover, some currencies such as Aussie dollar also depreciated yesterday against the USD by 0.15%. As indicated in the past, the correlations among gold, Euro and Aussie are still strong even thought they have weakened: during recent weeks, the linear correlation between gold and Euro /USD reached 0.42 (daily percent changes); the linear correlation between the silver and Euro /USD was 0.46 (daily percent changes). Thus, if the Euro and other risk currencies will continue to dwindle against the USD, they are likely to adversely affect gold and silver.
Current Gold and Silver Rates as of December 6th
Gold (short term delivery) is traded at $1,698 per t oz. a $4.5 increase as of 16:58*.
Silver (short term delivery) is at $33.06 per t oz – a $0.1 increase as of 16:58*.
Daily Outlook for December 6th
The prices of gold and silver didn’t do much yesterday and on a weekly scale (up to date) slightly fell. Bullion prices may continue their last week’s downward trend especially if any of the central banks will decide the cash rate: BOE and ECB will announce their respective cash rate for December. If ECB will decide to cut the rate again by 0.255pp, this could pull down the Euro, which is strongly linked with bullion prices. Up to now the negotiations between House Speaker and President Obama didn’t lead to any progress in tacking in fiscal cliff. The recent news regarding the negotiations between is that they had another brief meeting. The upcoming reports including: U.S jobless claims and Germany’s factory orders could affect the USD and Euro, respectively. If jobless claims will continue to dwindle it could pull up the USD; if German factory orders will fall it may weaken the Euro. Therefore, if the Euro and other “risk currencies” will decline 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 and tomorrow (all times GMT):
Tentative – French 10 Year Bond Auction
11:00– German Factory Orders
12:00 – Great Britain Bank Rate & Asset Purchase Plan
12:45 – ECB Press Conference and Euro Rate Decision
13:30 – U.S. Jobless Claims Weekly Report
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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