The prices of gold and silver continued to trade up for the second consecutive business days. Their recent rally coincided with the recovery of the Euro and other “risk currencies” such as the Aussie dollar and Canadian dollar. U.S housing starts and building permits hiked during September and thus may have had an adverse effect on the prices of precious metals. In Asia, China’s GDP expanded by 7.4% during the third quarter of 2012, which is close to expectations. Nonetheless, this new may adversely affect commodities prices. Thailand’s central bank decided to cut its one-day bond repurchase rate by 25pp to 2.75%. Today the EU Economic Summit will start and could have a strong effect on the Euro and commodities prices. Other items on today’s agenda: GB Retails Sales, Spanish 10 Year Bond Auction, Philly Fed Manufacturing Index and U.S. Jobless Claims.
Here is a short outlook for precious metals for Thursday, October 18th:
Precious Metals –October Update
On Wednesday, Gold rose again by 0.38% to $1,753; silver also increased by 0.83% to $33.23. During October, gold declined by 1.18%; silver, by 3.89%.
As seen below, the chart shows the developments of normalized prices of precious metals during September and October (normalized to 100 as of September 13th). During the past couple of days both precious metals have rallied.
The ratio between the two precious metals slipped again on Wednesday to 52.75. During October the ratio increased by 2.82% as gold out-performed silver.
The linear correlation of the two precious metals daily percent changes is still strong and robust, as indicated in the chart below. During October the linear correlation of their daily percent changes reached the highest level since May 2012, at 0.905, which means the two metals’ relation has tighten in recent weeks.
On Today’s Agenda
EU Economic Summit: there will be a two day 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 Spain’s debt crisis. Perhaps Spain will make its official request for aid in this Summit. If there will be big headlines from this Summit it may have some effect on the financial markets;
Philly Fed Manufacturing Index: In the previous September survey, the growth rate rose from -7.1 in August to -1.9 in September. If the index will remain negative it may adversely affect not only U.S Dollar but also American stock indexes, and commodities prices (the recent Philly Fed review);
GB Retails Sales: This report may affect the British Pound currency; in the recent report regarding August 2012, retails sales edged down by 0.2%;
Spanish 10 Year Bond Auction: the Spanish government will issue another bond auction; in the recent bond auction, which was held at the third week of September, the average rate reached 5.67% – the lowest rate in recent months; if Spain’s new auction will continue to show low rates, it could lower the chances of Spain making the request for aid from ECB in today’s EU Summit (although, I still think its only a matter of time before Spain will make the formal request for aid);
U.S. Jobless Claims Weekly Report: in the latest report the jobless claims fell by 30k to 339,000; this upcoming weekly update may affect the U.S dollar and consequently commodities;
Currencies / Bullion Market – October Update
The Euro/ USD rose again on Wednesday by 0.5% to 1.3118. During the month, the Euro/USD increased by 2.01%. Further, several currencies including Aussie dollar also sharply appreciated yesterday against the USD by 1.06%. The correlation between gold and Euro remains mid-strong and positive: during recent weeks, the linear correlation between the gold and EURO/USD was 0.49 (daily percent changes); the linear correlation between the gold and AUD/USD was 0.52 (daily percent changes). The recent rise of the Euro and Aussie dollar against the USD may have positively affected precious metals prices in recent days. Thus, if the Euro and other risk currencies will continue to rally, they are likely to pull up gold and silver.
Current Gold and Silver Rates as of October 18th
Gold (November 2012 delivery) is traded at $1,750 per t oz. a $2.3 or 0.13% decrease as of 00:03*.
Silver (November 2012 delivery) is at $33.17 per t oz – a $0.062 or 0.19% decrease as of 00:03*.
Daily Outlook for October 18th
The prices of precious metals rose for the second consecutive business day. The recent appreciation of the Euro, Aussie dollar and Canadian dollar has likely to pull up the price of gold and silver. If this trend will continue today, it is likely to further positively affect precious metals. To that end the EU Economic Summit might affect the forex market mainly if the Summit will result in big headlines related to Spain and Greece. Finally, today’s publication of U.S jobless claims and Philly Fed manufacturing survey could affect the USD and bullion prices. If the U.S will show signs of progress, then the prices of gold and silver may fall.
Here is a reminder of the top events and publications that are scheduled for today and tomorrow (all times GMT):
All Day – EU Economic Summit
09:30 –Retails Sales GB (September 2012)
Tentative – Spanish 10 Year Bond Auction
13:30 – U.S. Jobless Claims Weekly Report
15:00 – Philly Fed Manufacturing Index
13:00 – Canada’s CPI
15:00 – U.S. Existing Home Sales
For further reading: