The prices of gold and silver changed direction again and slightly declined on Thursday after both precious metals had increased in the previous two days. Their recent decline coincided with the fall of the Euro and other “risk currencies” such as Canadian dollar against the USD. U.S jobless claims changed direction and rose last week by 46k to 388k. The Philly Fed index rose again in October and turned positive for the first time in six months. This news may have contributed to the fall in the prices of bullion yesterday. Today will be the second day into the EU Summit. Up to now, the forex and commodities markets are still waiting for any headlines from this Summit. In the meantime, Spanish yields fell yesterday on long term bond to their lowest level since April. Today the EU Economic Summit will start and could have a strong effect on the Euro and commodities prices. This improvement in yields lowers the chances of Spain making a request for ECB bailout today. Update: Spain’s Prime Minister Mariano Rajoy stated his country won’t ask for a bailout for now. This news is likely to raise concerns regarding Euro debt crisis and thus may further pull down not only the Euro but also precious metals prices. Other items on today’s agenda: Canada’s CPI, and U.S. Existing Home Sales.
Here is a short outlook for precious metals for Friday, October 19th:
Precious Metals –October Update
On Thursday, Gold declined by 0.4% to $1,744; silver also decreased by 1.1% to $32.87. During October, gold declined by 1.65%; silver, by 4.94%.
As seen below, the chart presents the shifts of normalized prices of precious metals during September and October (normalized to 100 as of September 13th). During recent weeks both precious metals have had a downward trend.
The ratio between the two precious metals rose on Thursday to 53.08. During October the ratio increased by 3.47% as gold out-performed silver.
On Today’s Agenda
Canada’s CPI: This report will refer to the CPI and core consumer price index (controlling the volatile components such as energy, fruit and vegetables) for September 2012. According to the Canadian CPI report for August 2012, the CPI rose by 1.2% during the past 12 month up to August – this is a slightly lower rate than in July. This report might affect the Canadian dollar, which is also strongly correlated with commodities prices;
U.S. Existing Home Sales: in the previous report regarding August 2012 the number of homes sold rose: the seasonally adjusted annual rate of 4.82 million home sales; if this trend will continue it may help rally the U.S dollar.
EU Economic Summit: today will be the second day into the EU economic Summit, in which the European leaders will talk about the recent financial developments related to the EU debt crisis. In the Summit the members may talk about Greece and Spain’s debt crisis. If there will be big headlines from this Summit it may have some effect on the financial markets;
Currencies / Bullion Market – October Update
The Euro/ USD also declined on Thursday by 0.4% to 1.3066. During the month, the Euro/USD increased by 1.61%. Further, several currencies including Canadian dollar also depreciated yesterday against the USD by 0.77%. The correlation between gold and Euro remains mid-strong and positive: during recent weeks, the linear correlation between the gold and EURO/USD was 0.52 (daily percent changes); the linear correlation between the gold and USD/CAD was -0.57 (daily percent changes). The recent fall of the Euro and Aussie dollar against the USD may have positively affected precious metals prices in recent days. Therefore, if the Euro and other risk currencies will change direction and rise, they are likely to pull up gold and silver. Currently, the Euro/USD is edging down.
Current Gold and Silver Rates as of October 19th
Gold (November 2012 delivery) is traded at $1,743 per t oz. a $1.6 or 0.09% decrease as of 23:24*.
Silver (November 2012 delivery) is at $32.83 per t oz – a $0.038 or 0.12% decrease as of 23:24*.
Daily Outlook for October 19th
The prices of precious metals continue to zigzag with an unclear trend but may end up the week on a negative note unless if the Euro, Aussie dollar and Canadian dollar will appreciate against the USD. This may occur mainly if the EU Summit will pose some optimism regarding the EU debt crisis. Finally, today’s publication of U.S existing sales may adversely affect the prices of precious metals if the report will be positive, much like the recent housing starts report. .
Here is a reminder of the top events and publications that are scheduled for today (all times GMT):
13:00 – Canada’s CPI
15:00 – U.S. Existing Home Sales
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