Gold and silver remained flat during most of the day but the latest press conference of the Fed stirred up the forex markets. Gold and silver are currently trading sharply down – gold fell below the $1300 mark for the first time since September 2010 – following yesterday’s press conference of the Fed. Bernanke stated that the Fed may ease down QE3 in the coming months. In Asia, China’s flash manufacturing PMI report came out in which manufacturing sector fell at a faster pace in June. The PMI index fell to 48.3 in June compared to 49.1 in May. This news is also likely to drag down precious metals prices today. On today’s agenda: Libor Rate of Swiss National Bank, Flash German, French and Euro Zone Manufacturing, GB Retails Sales, Euro-Group Summit, U.S. Existing Home Sales, Philly Fed Manufacturing Index, and U.S. Jobless Claims.
Here is a short outlook for precious metals for Thursday, June 20th:
Precious Metals – June Update
On Wednesday, gold slightly rose by 0.51% to $1,373; Silver declined by 0.25% to $21.68. During June, gold declined by 1.36%; silver, by 2.72%.
In the chart below are the normalized rates of gold and silver for 2013 (normalized to 100 as of May 31st). The rates of gold and silver have slowly declined during June.
The ratio between the two precious metals slightly increased on Wednesday to 63.53. During June, the ratio rose by 1.40% as gold has slightly out-performed silver.
Fed may taper QE3 by the end of 2013
The FOMC published its statement and left its policy unchanged. Nonetheless, in the press conference that followed Bernanke stated that if economic conditions will continue to improve, the Fed may taper its current asset purchase program by the end of 2013. Moreover, the Fed may end QE3 by mid-2014.
The potential tapering of QE3 isn’t new: Bernanke’s testified earlier this month that tapering the current asset purchase program isn’t off the table and could be decided in the next several FOMC meeting.
The table above shows the reaction of precious metals to past FOMC decision. Considering the late press conference we might see a drop in gold and silver prices.
On Today’s Agenda
Libor Rate of Swiss National Bank: the Swiss National Bank will publish its updated Libor rate; this decision could affect not only currencies markets but also commodities markets the bank will change the Libor rate;
Flash German, French and Euro Zone Manufacturing PMI: In the previous monthly report regarding May 2013, the German PMI rose to 49 i.e. the manufacturing conditions are shrinking at a slower pace. This report serves as an indicator to the economic developments of the Euro Area’s leading economies’ manufacturing conditions; this news, in turn, may affect the Euro/USD currency pair and consequently commodities;
GB Retails Sales: This report may affect the path of the British Pound currency. In the previous report regarding April 2013, retails sales declined by 1.3%;
U.S. Jobless Claims Weekly Report: in the previous report the jobless claims declined by 12k to reach 334k; the next weekly report may affect the U.S dollar and consequently commodities and equities markets;
U.S. Existing Home Sales: in the previous report regarding April 2013 the number of homes sold slightly rose to a seasonally adjusted annual rate of 4.97 million houses; if this trend will persist, it might pressure up the U.S dollar;
Philly Fed Manufacturing Index: This monthly survey estimates the growth of the US manufacturing sectors. In the previous survey regarding May, the growth rate slipped from 1.3 in April to -5.2 in May. If the index will increase it may positively affect not only U.S Dollar but also American equity markets and commodities (the previous Philly Fed review);
Euro-Group Summits: In this summit, the EU ministers of finance and Euro-Group President will convene in Brussels. They are expected to talk about the recent economic and monetary developments in Europe;
Currencies / Bullion Market – June Update
The Euro/ USD changed direction and sharply fell on Wednesday by 0.72% to 1.3295. During June, the Euro/USD increased by 2.28%. Further, other currencies such as the Aussie dollar sharply depreciated yesterday against the U.S dollar by 2%. The FOMC statement may have pulled up the USD. The correlations among gold, Euro and Aussie dollar weakened again as seen in the chart below. If these correlations will continue to weakened, the developments in the currencies markets including the changes to the Aussie, Euro and Japanese yen are likely to have a lesser effect on bullion rates.
Current Gold and Silver Rates as of June 20th
Gold (short term delivery) is traded at $1,346.30 per t oz. a $27.70 or 2.02% decrease as of 05:19*.
Silver (short term delivery) is at $21.19 per t oz – a 2.03% decrease as of 05:19*.
Here is a reminder of the top events and publications that are scheduled for today and tomorrow (all times GMT):
08:30 – Libor Rate of Swiss National Bank
09:00 – Flash German, French and Euro Zone Manufacturing
09:30 – GB Retails Sales
13:30 – U.S. Jobless Claims
All Day – Euro-Group Summits
15:00 – U.S. Existing Home Sales
15:00 – Philly Fed Manufacturing Index
07:35 – Bank of Japan’s Kuroda Speaks
09:00 – EU Current Account
09:30 – Great Britain Net borrowing
All Day – ECOFIN Meetings
13:00 – Canada’s core CPI
13:30 – Canada Retails Sales
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