The prices of precious metals changed course and tumbled down yesterday after they spiked on Wednesday. China’s manufacturing PMI (opens pdf) inched down to 50.4, which means the manufacturing sectors in China are expanding at a slower pace than in the previous month. U.S jobless claims rose by 38k to reach 368k during last week. This news, however, didn’t seem to affect forex or commodities prices. It seems the market is waiting for today’s reports including non-farm payroll and manufacturing PMI. Will gold and silver change direction again on the first day of the month? Currently, gold and silver are trading up. On today’s agenda: non-farm payroll (update: employment rose by 157k), and U.S and GB Manufacturing PMI.
Here is a short outlook for precious metals for Friday, February 1st:
Precious Metals – January Update
On Thursday, the price of gold decreased by 1.15% to $1,660.6; Silver price also fell by 2.54% to $31.34. During the month, gold slipped by 0.85%; silver rose by 3.85%.
The chart below shows the developments in the normalized prices of bullion during the month (normalized to 100 as of December 31st). In recent days, the prices of silver and gold have had an unclear trend.
The ratio between the two precious metals rose on Thursday to 53. During January the ratio declined by 4.52% as gold under-performed silver.
On Today’s Agenda
U.S. Non-Farm Payroll Report: in the latest report for December, the labor market rallied again: the number of non-farm payroll employment rose by 155k; the U.S unemployment rate inched up to 7.8%; if in the upcoming report the employment will rise again by well above 120 thousand (in additional jobs), this may lower the odds of the Fed augmenting its current monetary policy and also better the economic conditions in the US; this report may affect not only the U.S dollar, but also precious metals (see here my last review on the U.S employment report); The table below presents the relation between the announcement of labor report and reaction of bullion rates. As seen, these items tend to be negatively linked so that if the non-farm payroll will present another rise in employment of around 150k and higher, then this may pull down bullion rates.
U.S. Manufacturing PMI: Based on the previous report, in December 2012 the index rose to 50.7%, which means the manufacturing is expanding; this index may affect foreign exchange rates, and commodities prices.
GB Manufacturing PMI: In the previous report regarding November the index rose to 51.4%. This rate means the manufacturing sector is expanding at a moderately faster pace; this index might affect GB Pound;
Currencies / Bullion Market – January Update
The Euro/ USD inched up again on Thursday by 0.09% to 1.3579. During the month, the Euro/USD increased by 2.93%. Moreover, some currencies such as Aussie dollar and Canadian dollar also appreciated yesterday against the USD by 0.07% and 0.44%, respectively. This upward trend in these “risk currencies” didn’t seem to affect precious metals. The correlations among gold, Canadian dollar and Aussie remained stable in recent weeks: during January, the linear correlation between gold and USD/CAD reached -0.31 (daily percent changes); the linear correlation between the gold and AUD /USD reached 0.47 (daily percent changes). If these “risk currencies” will continue to appreciate against the USD, they might positively affect gold and silver.
Daily Outlook for February 1st
Prices of precious metals changed direction and fell yesterday. This fall may have been related to an end of the month long squeeze. The recent news of China’s manufacturing PMI may have adversely affect commodities prices. The markets will be poised until the U.S non-farm payroll report. If this report will present a low gain (say below 120k) this could help rally bullion rates. Otherwise, bullion rates might resume their downward trend. The upcoming manufacturing PMI reports of U.S and GB could affect commodities prices. If the PMI will rise, this could pull up precious metals rates. Finally, if the Euro and other “risk currencies” will rally against the USD, they might pressure up affect bullion.
Here is a reminder of the top events and publications that are scheduled for today (all times GMT):
09:30 – GB Manufacturing PMI
13:30 – U.S. Non-Farm Payroll Report
15:00 – U.S. Manufacturing PMI
For further reading:
- Gold and Silver Outlook for January 28- February 1
- Weekly Outlook Financial Markets for January 28- February 1
- Gold and Silver Outlook for January
- Gold and Silver Yearly Outlook For 2013