Gold and silver changed course and rallied yesterday along with other commodities such as oil and the major “risk related currencies” such as the Euro and Aussie dollar. The main event of the week – the publication of the minutes of the recent FOMC meeting – might shed some light on the future plans of the Fed (update: the FOMC members discussed the possibility of ending QE3 by the end of the year – this news may have contributed to the sharp fall in the prices of precious metals today. Bernanke remained in the sidelines on this issue) . This publication could affect the direction of precious metals during the day. Currently, the prices of gold and silver are plummeting. On today’s agenda: China’s Trade Balance (update: China shifted to a trade deficit during March on account of the sharp rise in imports), French Industrial Production, Minutes of FOMC Meeting, U.S. Federal Budget Balance, U.S 10 Year Bond Auction, Australia Employment Report.
Here is a short outlook for precious metals for Wednesday, April 10th:
Precious Metals – April Update
On Tuesday, the price of gold sharply rose by 0.90% to $1,586.3; Silver also spiked by 2.74% to $27.88. During April, gold declined by 0.53%; silver, by 1.45%.
In the chart below are the normalized rates of gold and silver between March and April (normalized to 100 as of February 28th). The prices of gold and silver bounced back yesterday from their recent downward trend.
The sharp movement of both bullion rates is represented in the rise in precious metals prices’ volatility during the month: the standard deviations of gold and silver (daily percent changes) reached 1.13% and 1.86%, respectively – their highest level this year.
Minutes of FOMC Meeting in March: Following the March FOMC meeting, in which the Fed kept its monetary policy unchanged, this news had a moderate effect on the prices of precious metals. If the Fed won’t augment its current QE3, the prices of gold and silver might continue to dwindle. The minutes of the latest FOMC meeting might add some insight behind the future steps the Fed is planning; the minutes might shed some light on the Fed’s exit strategy for its current QE program. It might show if the Fed is planning to step up and raise its asset purchase program. Either way, the minutes might affect the direction of precious metals;
U.S. Federal Budget Balance: this upcoming update will refer to March 2013; in the recent report regarding February the deficit sharply rose by $203 billion; the total deficit for the fiscal year of 2013 reached $493 billion. In comparison, the deficit in the same time in 2012 was $580.8 billion; this is decrease of 36.5% compared to 2012;
China‘s Trade Balance: according to the recent monthly update, China’s trade balance fell again to a $15.3 billion surplus; if the surplus will further shrink, it could indicate that China’s economic growth is slowing down and thus may negatively affect prices of commodities.
French Industrial Production: The forthcoming report will refer to March 2013. In the recent update, the industrial production tumbled down by 1.2% during February;
U.S 10 Year Bond Auction: the U.S government will issue its monthly with bond auction; in the recent auction, which was held at the middle of March, the average rate reached 2.03% – slightly lower than in the precious auction;
Australia Employment Report: in the previous report regarding February 2013 the rate of unemployment remained unchanged at 5.4%; the number of employed (seasonally adjusted) rose by 71,500 people (see here the recent report);
Currencies / Bullion Market – April Update
The Euro/ USD also increased on Tuesday by 0.57% to 1.3084. During the month, the Euro/USD increased by 2.1%. Moreover, other currencies such as the Aussie dollar and Canadian dollar also appreciated yesterday against the U.S dollar by 0.73% and 0.02%, respectively. The appreciation of “risk related currencies” against the USD didn’t seem to affect the prices of gold and silver. The correlations among gold, Euro and Aussie dollar remained weak during March/April: the linear correlation between gold and Euro/USD was -0.04 (daily percent changes); the linear correlation between the gold and AUD/USD reached -0.02 (daily percent changes). These weak relations suggest the recent fall of gold and silver had little to do with the daily shifts in the foreign exchange markets.
Here is a reminder of the top events and publications that are scheduled for today and tomorrow (all times GMT):
Tentative –China’s Trade Balance
Tentative –OPEC Monthly Report
08:45 – French Industrial Production
19:00 – Minutes of FOMC Meeting in March
19:00 –U.S. Federal Budget Balance
Tentative – U.S 10 Year Bond Auction
02:30 – Australia Employment Report
09:00 – ECB Monthly Bulletin
Tentative –IEA Monthly Oil Report
Tentative – Italian 10 Year Bond Auction
13:30 – U.S. Jobless Claims
For further reading: