Gold and Silver Prices - Daily Outlook for June 18

Gold and silver prices haven’t dome much in the past several days as precious metals traders are waiting for to see what the Fed will do next. Today the FOMC meeting will commence will conclude tomorrow with a statement and press conference. Will the Fed decide to change its current policy? Its economic outlook? If so, how will it affect precious metals markets? In a recent article I review the possible outcomes and the potential effect they may have on gold and silver rates. Until tomorrow the low volatility of bullion is likely to persist. On today’s agenda: GB CPI, German ZEW economic sentiment, Inflation Report Hearings, Bank of England Inflation Report, U.S. Housing Starts and building permits monthly report, Japanese Trade balance and U.S core CPI.

Here is a short outlook for precious metals for Tuesday, June 18th:

Precious Metals – June Update

On Monday, gold slightly fell by 0.33% to $1,383; Silver also slipped by 0.89% to $21.76. During June, gold declined by 0.69%; silver, by 2.11%.

In the chart below are the normalized rates of gold and silver for 2013 (normalized to 100 as of May 15^th). The rates of gold and silver haven’t performed well in recent weeks.

The ratio between the two precious metals slightly fell on Monday to 63.56. During June, the ratio rose by 1.46% as gold slightly out-performed silver.

The gold and silver futures volumes of trade have declined on Friday to 106 thousand and 52 thousand, respectively – the lowest volume of trade in the past several days. This low volume might pick up tomorrow if the Fed will announce or make any change to its current policy, which will impact precious metals. If the volume will rise in the coming days, this could lead to an increase in volatility of precious metals. The chart below presents the volume of trading gold and silver futures in the CME from the past several weeks.

On Today’s Agenda

GB CPI: This report may affect the British Pound currency. In the previous report regarding April 2013, the CPI sharply declined to an annual rate of 2.4%;

German ZEW economic sentiment: In April, the ZEW indicator for Germany edged up to 36.4 points; if Germany’s economic sentiment will rally, the Euro will plausibly strengthen against the USD;

Inflation Report Hearings: Bank of England Governor and other PMC members will testify before Parliament’s Treasury Committee. They will refer to the economic progress of the UK and developments in the currencies markets;

Bank of England Inflation Report: this report will present the yearly rate of GB’s inflation based on the estimate of Bank of England for the next two years;

U.S. Housing Starts: this report was historically correlated with gold– as housing starts fell, gold tended to rise the next day (even when controlling to the U.S dollar effect); in the recent monthly report, the adjusted annual rate reached 853,000 in April 2013, which was 16.5% below March’s rate;

U.S. Building Permits: in the previous update, building permits spiked during April by 14.3% (M-o-M) in the adjusted annual rate of building permits was 1,017,000. If building permits will continue to increase, it may indicate that the U.S housing market (from this aspect) is slowly recovering;

U.S Core CPI: according to the U.S Bureau of Labor statistics, during April, the CPI declined by 0.4%; the core CPI inched up by 0.1%; the core index rose over the past twelve months by 1.7%;

Japanese Trade balance: In April 2013 the Japanese trade balance deficit fell by 16.9% compared to March, and reach 764 billion yen (roughly $7.79 billion) deficit (seasonally adjusted figures). This is drop in deficit was due to the drop in imports (by 2.4%) and the fact that exports remained flat;

Currencies / Bullion Market – June Update

The Euro/ USD slightly increased on Monday by 0.15% to 1.3367. During the month, the Euro/USD increased by 2.83%. Conversely, other currencies such as the Aussie dollar depreciated yesterday against the U.S dollar by 0.28%. The correlations among gold, Euro and Aussie dollar weakened as seen in the chart below. If these correlations will continue to weakened, the movement of the Aussie, Euro and Japanese yen are likely to have a lesser effect on bullion prices.

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

Today

09:30 – GB CPI

10:00 – German ZEW economic sentiment

10:00 – Inflation Report Hearings

Tentative – Bank of England Inflation Report

13:30 – U.S. Housing Starts

13:30 – U.S. Building Permits

13:30 – U.S Core Consumer Price Index

23:50 – Japanese Trade balance

Tomorrow

09:30 – Minutes of MPC Meeting

Tentative – German 10 Year Bond Auction

17:40 – Governor Poloz speaks

19:00 – FOMC Meeting, Economic Forecast and Press Conference

02:45 – China flash Manufacturing PMI

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