Gold and silver prices didn’t do much yesterday as both precious metals edged up for the first time this week. The uncertainty around the future steps of Spain and whether it will request from ECB to start its bond purchase program is likely to keep the Euro weak against the USD. Currently, the prices of gold and silver are falling. On today’s agenda: G7 Summit, IMF Meeting, Canadian and American trade balance monthly updates, U.S. Jobless Claims, FOMC member Stein Speaks, and U.S. Federal Budget Balance.
Here is a short outlook for precious metals for Thursday, October 11th:
Precious Metals –October Update
On Wednesday, Gold edged up by 0.01% to $1,765.1; Silver also increased by 0.36% to $34.11. During October, gold fell by 0.5%; silver, by 1.35%.
As seen below, the chart presents the shifts of normalized prices of precious metals during September-October (normalized to 100 as of September 13th). During the week, gold and silver slightly declined.
The ratio between the two precious metals declined again on Wednesday to 51.75. During October, the ratio increased by 0.87% as silver slightly under-performed gold.
Despite the different percent changes of gold and silver, the linear correlation of the two precious metal daily percent changes remains strong and robust, as indicated in the chart herein. During October the linear correlation of their daily percent changes reached 0.837, which means the two metals’ relation has slightly loosen in recent months.
Europe Still Awaits Spain
One of the main factors for the recent weakness of the Euro against the USD is the delay of Spain in making the formal request for ECB to commence its bond purchase program. In the meantime, the recent downgrade of Spain’s credit rating to one level above junk bonds by S&P may nudge Spain towards making the request sooner rather than later. On the other hand, Spain’s bond yields continue to fall and this, according to analysts, is one of the key reasons for Spain delaying its request. Spain’s delay also seems to adversely affect related countries such as Italy, as its borrowing costs continue to rise. In any case, until Spain will make the formal request, the situation is likely to keep pulling down the Euro.
The recent grim outlook of the IMF for the global economic growth, especially the uncertainty around the future economic progress of the Euro-zone also isn’t helping the Euro.
Even the modest positive news regarding Greece and the expectations that Germany will approve the next bailout package for Greece doesn’t seem enough to curb the downward trend of the Euro/USD.
On Today’s Agenda
American Trade Balance: This report will refer to August; it will show the recent shifts in imports and exports of goods and services to and from the U.S, including commodities; according to the recent American trade balance report regarding July 2012 the goods and services deficit edged up during the month to $42 billion;
U.S. Jobless Claims Weekly Report: in the previous weekly update the jobless claims increased by 4k to 367,000; this upcoming weekly report may affect the U.S dollar and consequently the prices of commodities;
G7 Summit: the G7 Summit will be held in Tokyo in which the ministers of finance of the G7 will talk about the recent financial developments in the leading economies. In the Summit the ministers may talk about the “fiscal cliff” in the U.S and the European debt crisis. If there will be big headlines from this Summit it may have some effect on the financial markets;
IMF Meetings: the IMF Meeting will span over three days;
U.S. Federal Budget Balance: this upcoming publication will present the changes in the U.S federal balance for September 2012; this report indicates the government debt growth and thus may affect the U.S dollar. In the recent report regarding August the deficit rose by $190 billion to a deficit of $1,164 billion for the fiscal year of 2012; this is a decrease of 5% compared to 2011;
Canadian Trade Balance: In the recent report regarding July 2012, exports fell by 3.4% and imports declined by 2.2%; as a result, the trade deficit expanded from a $1.9 billion deficit in June to $2.3 billion deficit in July; this report may affect the Canadian dollar which tends to be strongly correlated with prices of commodities;
FOMC member Stein Speaks: The title of the speech is “Evaluating Large-Scale Asset Purchases “;
Currencies / Bullion Market – October Update
The Euro/ USD also declined again for the third consecutive day, on Wednesday it fell by 0.09% to 1.2874. During the month, the Euro/USD rose by 0.12%. On the other hand, several currencies including Aussie dollar appreciated again yesterday against the USD by 0.27%. The correlation between gold and Euro remains mid-strong and positive: during September-October, the linear correlation between the gold and EURO/USD reached 0.63 (daily percent changes); the linear correlation between the gold and Aussie dollar/USD was 0.67 (daily percent changes). Following yesterday’s mixed trend in the foreign exchange markets in which the Euro depreciated against the USD, while other risk currencies such as the Aussie dollar appreciated against the USD, this could contributed to the slow movement of precious metals prices. If the Euro and other risk currencies will further decline, they are likely to also pull down gold and silver. Currently, the Euro/USD is falling.
Current Gold and Silver Rates as of October 11th
Gold (November 2012 delivery) is traded at $1,763.1 per t oz. a $2 or 0.11% decrease as of 23:22*.
Silver (November 2012 delivery) is at $33.97 per t oz – a $0.139 or 0.41% decrease as of 23:22*.
Daily Outlook for October 11th
The prices of precious metals didn’t do much yesterday and the anticlimax in the bullion market following the decision of the FOMC to launch QE3, which was announced back in mid-September, continues. The recent mixed trend of the Euro and Aussie dollar may have also contributed to the little movement of precious metals. Today’s IMF meeting and G7 Summit might further affect the forex and commodities markets, if its members will come up with big headlines regarding the recent economic developments in Europe and U.S. Today’s publication of U.S trade balance, jobless claims and Federal budget balance could adversely affect the USD is these reports won’t be positive.
Here is a reminder of the top events and publications that are scheduled for today and tomorrow (all times GMT):
All Day – G7 Summit
All Day – IMF Meetings
13:30 –Canadian Trade Balance
13:30 –American Trade Balance
13:30 – U.S. Jobless Claims Weekly Report
15:00 – FOMC member Stein Speaks
19:00 –U.S. Federal Budget Balance
10:00– Euro Area Industrial Production
13:30 – U.S. Producer Price Index
14:55 – UoM Consumer Sentiment (preliminary)
17:35 – FOMC member Lacker’s Speech
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