Following the latest FOMC meeting, in which no big surprises or changes were made, The market remains clam and all eyes continue to focus on Europe. Will the volatility of precious metals prices remain low today as it did yesterday On today’s agenda: Great Britain Claimant Count Change, China flash Manufacturing PMI, Japanese Trade balance, Minutes of MPC Meeting, U.S. Housing Starts & Building Permits, GB Annual Budget.
Here is a short outlook for precious metals for Thursday, March 21st:
Precious Metals – March Update
The FOMC concluded yesterday its second meeting of the year. The Fed didn’t change its policy and didn’t update its economic outlook by much. This resulted in another quiet trading day of bullion traders. In the press conference Ben Bernanke didn’t give away anything news and stayed with his usual script.
The table below shows the price movement of precious metals on the day of the FOMC meeting and the day after.
In the chart below are the normalized rates of gold and silver between February and March (normalized to 100 as of February 18th). The prices of gold and silver didn’t do much during the past couple of weeks.
The linear correlation between gold and silver remained strong during the month even though it did decline compared to the previous months. The current correlation is the lowest in recent years as indicated in the chart herein. This means that the two metals’ relation has loosened in recent weeks.
Currencies / Bullion Market – March Update
The linear correlation between the gold and major currencies pairs remained weak in recent weeks. This means that the developments in the forex markets had little impact on the direction of gold and silver prices. The linear correlation between silver and AUD/USD reached only 0.1 (daily percent changes); the relation between gold and USD/JPY reached -0.28. Based on the above, if the Euro and other risk related currencies will continue to decline against the USD, as they did during the month, the prices of gold and silver aren’t likely to be strongly affected by it.
The chart below shows the linear correlation among precious metals and major currencies pairs during February and March.
Flash German, French and Euro Zone Manufacturing PMI: In the recent update regarding February 2013, the German PMI increased to 50.1 i.e. the manufacturing conditions are still expanding at a slower rate. This report serves as an indicator to the economic changes of the Euro Area’s leading economies’ manufacturing conditions;
GB Retails Sales: This report will present the developments in the retails sales in Great Britain for February 2013. It may affect the direction of the British Pound currency. In the latest report regarding January 2013, retails sales fell again by 0.6% – second month in a row;
U.S. Jobless Claims: in the recent report the jobless claims declined again by 10k to reach 332k; this upcoming weekly update may affect the path of U.S dollar and consequently commodities and stocks markets;
Canada Retails Sales: This report will refer to the retails sales in Canada as of January. It may affect the USD/CAD currencies pair, which is strongly correlated with commodities rates. In the recent report regarding December 2012, retails sales fell again by 0.9%.
U.S. Existing Home Sales: This report will pertain to the changes in U.S. existing home sales for February 2013; in the latest report regarding January 2013 the number of homes sold edged down to a seasonally adjusted annual rate of 4.92 million houses; if this trend will continue, it might pressure down the U.S dollar;
Philly Fed Manufacturing Index: This monthly survey shows an estimate for the growth of the US manufacturing sectors. In the latest February survey, the growth rate declined again from -5.8 in January to -12.5 in February. If the index will continue to decline it may adversely affect not only U.S Dollar (the previous Philly Fed review);
Here is a reminder of the top events and publications that are scheduled for today and tomorrow (all times GMT):
09:00 – Flash German, French and Euro Zone Manufacturing PMI
10:30 – GB Retails Sales
13:30 – U.S. Jobless Claims
13:30 – Canada Retails Sales
15:00 – Philly Fed Manufacturing Index
09:00 – German Business Climate Survey
For further reading: