The prices of gold and silver changed course and slightly declined on Wednesday. Their decline coincided with the drop of leading currencies against USD such as Euro and Aussie dollar. The U.S retail sales report, which was published yesterday, showed retail sales rose last month by the highest rate in months. This means the economic activity in the US grew. This news may have partly contributed to the moderate decline in precious metals prices. The U.S federal budget report (opens pdf) came out and showed a rise in deficit of $203 billion. During the fiscal year of 2013, the total deficit reached $494 billion. In comparison, in 2012 the deficit was 580. So the deficit in 2013 is currently 15% lower than in 2012. This is an indication for a decline in financial risk of the U.S economy. Finally, a 9 year U.S bond auction was held yesterday. The average yield reached 2.029. Back in January the 9 year bond yield was 1.863. This shows a decline in demand for U.S treasuries – another indication for a shift in market sentiment towards bullish. Will gold and silver continue to fall? Currently gold and silver prices are slightly falling. On today’s agenda: ECB Monthly Bulletin, Libor Rate of Swiss National Bank, EU Economic Summit, U.S. Jobless Claims, and U.S. Producer Price Index .
Here is a short outlook for precious metals for Thursday, March 14th:
Precious Metals – March Update
On Wednesday, the price of gold slipped by 0.57% to $1,588.4; Silver also decreased by 0.72% to $28.93. During March, gold rose by 0.68%; silver increased by 1.9%.
In the chart below are the normalized prices of gold and silver between late February and March (normalized to 100 as of February 18th). The rate of gold and silver remained virtually unchanged in recent weeks.
The linear correlation of the two precious metal daily percent changes remains strong and robust, as indicated in the chart below. During March the linear correlation of their daily percent changes rose from February’s correlation, which means the two metals’ relation has tighten in recent weeks.
U.S. Producer Price Index: In the previous report regarding January, this index for finished goods inched up by 0.2% compared with December’s rate but rose by 1.4% in the past 12 months; this news might affect the direction of precious metals rates;
U.S. Jobless Claims: in the latest report the jobless claims slightly declined by 7k to reach 347k; this upcoming weekly report may affect the direction of U.S dollar and consequently commodities and stocks markets;
Libor Rate of Swiss National Bank: the Swiss National Bank will decide its Libor rate; this decision could affect not only foreign exchange markets but also commodities markets if the central bank will decide to change its Libor rate;
EU Economic Summit: In this summit, the EU ministers of finance will present a plan for budget austerity. They will convene in Brussels. In this summit the EU ministers are likely to go over the issue of how the ECB should oversight the EU banks;
ECB Monthly Bulletin: This monthly report for February examines the economic changes of the Euro Area such as the price stability, interest rate decisions and governments’ debt; this report may provide additional insight behind the updated expectations of the EU growth;
Currencies / Bullion Market – March Update
The Euro/ USD declined again on Wednesday by 0.57% to 1.2961. During the month, the Euro/USD slipped by 0.82%. Moreover, several currencies such as the Canadian dollar also depreciated again yesterday against the USD by 0.19%. This shows the moderate drop in precious metals had some to do with the developments in the forex markets. The correlations among gold, Canadian dollar and Aussie dollar remained weak: during February/March, the linear correlation between gold and USD/Yen reached -0.26 (daily percent changes); the linear correlation between the silver and AUD/USD reached 0.11 (daily percent changes). Despite the weak correlations, if leading currencies will continue to depreciate against the USD, they might drag down precious metals. The chart below shows the linear correlations of among leading currencies and precious metals during February and March.
Gold (short term delivery) is traded at $1,587 per t oz. a $1.2 or 0.07% decrease as of 22:20*.
Silver (short term delivery) is at $28.92 per t oz – a $0.05 or 0.15% decrease as of 22:20*.
Here is a reminder of the top events and publications that are scheduled for today and tomorrow (all times GMT):
09:00 – ECB Monthly Bulletin
09:30 – Libor Rate of Swiss National Bank
All Day (two days Summit) – EU Economic Summit
13:30 – U.S. Jobless Claims
13:30 – U.S. Producer Price Index
10:00 – Euro Area CPI
13:30 –U.S Core Consumer Price Index
14:00 – U.S. TIC Long Term Purchases
14:15 – American Industrial Production
14:55 – UoM Consumer Sentiment
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