Gold and Silver – Daily Outlook for December 5th

Gold and silver changed direction and after they had declined in the first two days of the week, they have changed direction yesterday and rallied. Their recent recovery, however, might not last long and could continue to be part of an unclear trend until the next FOMC meeting, which will be held during December 17-18. In the meantime, the developments in the forex and stock markets along wit the progress of the U.S economy are likely to affect the direction of precious metals prices. Yesterday, the ADP estimated 215k jobs were added to the private sector. This will be one benchmark for Friday’s NF payroll report. This high number is likely to drag down the prices of gold and silver. In the housing market, new home sales spiked by 25.4% in October to reach 444k in annual pace. Finally, the U.S goods and services international trade deficit contracted during October to reach $40.6 billion. These reports are positive signals for the progress of the U.S economy and are likely to bring gold and silver prices down. On today’s agenda: BOE Rate Decision & Asset Purchase Plan, ECB rate decision, U.S Factory Orders, U.S. Jobless Claims, U.S GDP 3Q 2013, and Australian Trade Balance.

Here is a short overview for bullion for Thursday, December 5th:

Gold and Silver – December Review                          

On Wednesday, gold rose by 2.14% to $1,247.4; Silver, by 4.02% to $19.79 – its highest level this month. During December, gold declined by 0.25%; silver, by 1.05%. In the chart below are the normalized prices of precious metals prices for 2013 (normalized to 100 as of November 11th). The prices of gold and silver have rallied from the recent tumble.

Gold and silver Chart 2013 December 5The ratio between the two precious metals fell on Wednesday to 63.04. During the month, the ratio increased by 0.81% as silver has moderately under-performed gold.

Gold to silver ratio Chart 2013 December 5The gold and silver futures volumes of trade have rallied and reached on Wednesday 190 thousand and 62 thousand, respectively. The volume of trade may continue to pick up in the following days.

On Today’s Agenda

ECB Rate Decision: ECB will announce its monetary policy and economic outlook as of December. The current expectations are that ECB will keep its cash rate unchanged especially since ECB cut its rate last month by 25pp to 0.25%. ECB President Mario Draghi may refer to the weak Euro and of any potential plans to introduce a new LTRO for banks that agree to use it for lending businesses;

U.S Factory Orders: This report will refer to the changes in U.S. factory orders of manufactured durable goods during November; in the previous report factory orders increased by 1.7%; this report will offer some insight regarding the developments of the U.S economy;

BOE Rate Decision: Bank of England will come out with its basic rate for December 2013; the MPC will also state of any new developments to its asset purchase pogrom; as of November, BOE kept its interest rates at 0.5% and the asset purchase plan at £375 billion;

U.S GDP 3Q 2013: In the early estimate, the U.S GDP grew by 2.8% in the third quarter of 2013. If the growth rate in the second estimate falls from the first estimate, this could negatively impact not only the US dollar but also commodities prices;

U.S. Jobless Claims:  In the past report the jobless claims declined by 10k to reach 316k; the next weekly report may affect the U.S dollar and consequently commodities and equities markets;

Currencies / Precious Metals Correlations – December Update

On Wednesday, the Eur/USD currency pair inched up by 0.04% to 1.3593. During December, the Eur/USD edged up by 0.01%. Conversely, other currencies such as the Aussie dollar sharply depreciated yesterday against the U.S dollar by 1.18%. The correlations among gold, silver and Euro weakened in recent weeks, e.g. the linear correlation between the Euro/USD and gold price is 0.44 during November/December.

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

Today

02:30 – Australian Trade Balance

12:00 – BOE Rate Decision & Asset Purchase Plan

12:45 – ECB Rate Decision

13:30 – Second U.S GDP 3Q 2013 Estimate

13:30 – U.S. Jobless Claims

15:00 – U.S Factory Orders

Tomorrow

08:15 – Switzerland’s CPI

11:00 – German Factory Orders

13:30 – Canada’s Employment Report

13:30 – U.S. Non-Farm Payroll Report

13:30 – U.S Personal spending

Tentative – China’s Trade Balance

Tentative – Bank of Japan’s Kuroda Speaks

14:55 – UoM Consumer Sentiment

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