The prices of gold and silver rose during yesterday. Their rally may have stemmed from the recent developments related to Cyprus bailout plan that may have also adversely affected the Euro and other risk related currencies. This development may have raised the demand for safe haven investment and thus helped rally precious metals prices. In the meantime, the GLD ETF isn’t the only one that is shrinking, Bloomberg reports that Indian gold ETFs are also contracting. The main event of the week will be the FOMC meeting that will start today and conclude tomorrow with a press conference. Until then the volatility of precious metals are likely to remain low. Will gold and silver continue to rise? Currently, gold and silver are rising. On today’s agenda: Great Britain PPI Input, German ZEW economic sentiment, and Bank of England Inflation letter.
Here is a short outlook for precious metals for Tuesday, March 19th:
Precious Metals – March Update
On Monday, the price of gold edged up by 0.12% to $1,592.6; Silver also slightly rose by 0.15% to $28.83. During March, gold rose by 0.94%; silver, by 1.52%.
In the chart below are the normalized rates of gold and silver between February and March (normalized to 100 as of February 18th). The prices of gold and silver have had an unclear trend.
The ratio between the two precious metals rose on Monday to 55.62. During the month the ratio edged up by 0.1% as gold slightly out-performed silver.
The gold and silver futures volumes of trade have risen on Monday to 205 thousand and 38 thousand, respectively. These numbers are lower than the volume traded a couple of weeks back. If the volume will change course and fall today, this could suggest the odds of sudden sharp change in the prices of gold and silver due to low volume will fall. The chart below presents the volume of trading gold and silver futures in the CME during February and March.
On Today’s Agenda
Great Britain PPI Input: this report will refer to the GB’s PPI input for February 2013; as of the latest monthly update, the PPI input rose by 1.3%;
German ZEW economic sentiment: The upcoming update will refer to the ZEW indicator of economic sentiment for Germany for March. In February the ZEW indicator for Germany increased again to 48.2 points; if Germany’s economic sentiment will rise further, the Euro will plausibly strengthened against other currencies such as the USD;
Bank of England Inflation letter: this report will show the yearly rate of GB’s inflation based on the estimate of Bank of England; the bank will publish the letter only if the inflation is exceed 3% or will be below 1%;
Currencies / Bullion Market – March Update
The Euro/ USD sharply fell on Monday by 0.89% to 1.296. The recent developments related to Cyprus may have been the key reason for the decline of the Euro during yesterday. During the month, the Euro/USD decreased by 0.83%. Moreover, many other currencies such as the Aussie dollar and Canadian dollar also depreciated yesterday against the U.S dollar by 0.08% and 0.25%, respectively. The tumble of major currencies against the U.S dollar didn’t seem to curb the rally of precious metals. Moreover, the correlations among gold, Japanese yen and Aussie dollar remained mid-weak in recent weeks: during February/March, the linear correlation between gold and USD/Yen was -0.31 (daily percent changes); the linear correlation between the gold and AUD/USD reached 0.26 (daily percent changes). These weak correlations might suggest the recent rise of gold had little to do with the daily developments in the foreign exchange markets. Since the correlations among precious metals and risk related currencies remain weak; if the Euro will continue to fall, it is likely to have little effect on precious metals prices.
Current Gold and Silver Rates as of March 19th
Gold (short term delivery) is traded at $1,604.8 per t oz. a $0.7 or 0.01% increase as of 08:05*.
Silver (short term delivery) is at $28.91 per t oz – a 0.11% increase as of 08:05*.
(* GMT)
Here is a reminder of the top events and publications that are scheduled for today and tomorrow (all times GMT):
Today
10:30 – Great Britain PPI Input
11:00 – German ZEW economic sentiment
Tentative – Bank of England Inflation letter
Tomorrow
10:30 – Great Britain Claimant Count Change
10:30 – Minutes of MPC Meeting
13:30 – U.S. Housing Starts
13:30 – U.S. Building Permits
Tentative – German 10 Year Bond Auction
13:30 – GB Annual Budget
19:15 – FOMC Meeting
23:50 – Japanese Trade balance
02:45 – China flash Manufacturing PMI
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