The precious metals continue to seek direction: Yesterday the prices of silver and gold bounced back and thus changed direction again. Their rally coincided with the rise of other commodities including oil. The recent U.S reports gave a mixed signal regarding the progress of the economy: Trade deficit of goods and services was up in May to $45 billion mainly due to the decline in exports and sharp rise in imports; jobless claims slid by 5k to reach 343k; non-manufacturing PMI fell to 52.2 in June. Finally, according to ADP 188k jobs were added in June. If the non-farm payroll report that will come out on Friday will surpass this number, it could pull up equities and drag down gold and silver prices. Today is a U.S holiday so the markets will be closed. The markets in Asia and Europe will remain open in this busy day that includes: ECB Rate Decision, Bank of Japan’s Kuroda Speaks, and BOE Rate Decision.
Here is a short outlook for precious metals for Thursday, July 4th:
Precious Metals – July Update
On Wednesday, gold changed direction again and rose by 0.68% to $1,251.9; Silver also increased by 2.04% to $19.69. During July, gold rallied by 2.3%; silver, by 1.25%.
In the chart below are the normalized rates of gold and silver for 2013 (normalized to 100 as of June 18th). The rates of gold and silver moved in an unclear trend during the week.
The gold and silver futures volumes of trade have declined on Wednesday to 187 thousand and 40 thousand, respectively. These numbers are lower than the volume traded a couple of weeks back. If the volume will remain continue to fall in the coming days, this could suggest the odds of sudden sharp changes 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 June and July.
Bank of Japan’s Kuroda Speaks: Bank of Japan Governor will give a speech at the Branch Managers Meeting, in Tokyo. Considering the high volatility of Japanese yen and Japan’s equity markets in recent weeks, his words could influence traders;
BOE Rate Decision: Bank of England will publish its basic rate for July 2013; the MPC will also announce of any new developments to its asset purchase pogrom; as of June, BOE left the rate unchanged at 0.5% and the asset purchase plan s at £375 billion;
ECB Rate Decision: ECB will announce its cash rate for July. Following the last meeting in which the ECB left its rate at 0.50%, all eyes will be on Draghi’s next move. Some suspect he may keep ECB’s monetary policy unchanged. The idea of ECB providing a negative deposit rate is likely to remain in the back burner for the time being. I still think this scenario is less likely and that the ECB will leave for now its rate unchanged. Nonetheless, if ECB will cut its cash rate again, the Euro is likely to fall;
Currencies / Bullion Market – July Update
The Euro/ USD currency pair also rallied on Wednesday by 0.23% to 1.3009. During the month, the Euro/USD slipped by 0.01%. Conversely, other currencies such as the Aussie dollar depreciated yesterday against the U.S dollar by 0.66%. The correlations among gold, Euro and Aussie dollar weakened, e.g. the correlation between the AUD/USD and gold price is 0.30 during June-July. If these correlations will continue to weaken, the developments of the Aussie, Euro and Canadian dollar against the USD are likely to have a lesser effect on precious metals prices.
Here is a reminder of the top events and publications that are scheduled for today and tomorrow (all times GMT):
01:30 – Bank of Japan’s Kuroda Speaks
12:00 –BOE Rate Decision & Asset Purchase Plan
12:45 – ECB Rate Decision
11:00 – German Factory Orders
13:30 – Canada’s Employment Report
13:30 – U.S. Non-Farm Payroll Report
15:00 – Canada’s Ivey PMI
For further reading:
- Gold and Silver Outlook for July
- Will Gold Recover from its Recent Fall?
- Gold and Silver Outlook for July 1-5
- Weekly Outlook of Financial Markets for July 1-5
- Euro/USD Weekly Overview for July 1-5
- Gold and Silver Yearly Outlook For 2013