The prices of gold and silver resumed their downward trend and fell yesterday. In the U.S, consumer confidence sharply rose from 69 in April to 76.2 in May. The rise in the index may have helped pull up U.S equity markets including S&P500 and Dow Jones. Moreover, other commodities such as oil also rose yesterday. Conversely, several “risk related currencies” such as the Euro and Aussie dollar depreciated against the USD. Will gold and silver change direction and bounce back today? On today’s agenda: Euro Area Monetary Development, Bank of Canada’s Overnight Rate (Update: the Bank left its interest rate unchanged at 1%. Bank Governor Carney will step down in the coming days and will take over the Bank of England governor position), Spanish 10 Year Bond Auction, Australia’s Building Approvals, and Australia Private New Capital Expenditure.
Here is a short outlook for precious metals for Wednesday, May 29th:
Precious Metals – May Update
On Tuesday, gold fell again by 0.56% to $1,378.9; Silver also decreased by 1.34% to $22.18. During the May, gold declined by 6.34%; silver, by 8.14%.
In the chart below are the normalized prices of gold and silver for 2013 (normalized to 100 as of April 15th). The prices of gold and silver declined in recent weeks.
Euro Area Monetary Development: In the recent March report, the annual growth rate for M3 declined to 2.6%; M1 edged up to 7.1%. Finally, the annual growth rate of loans to private sector reached -0.8%. This news suggests the EU economy continues to slowdown. The latest decision of the ECB to cut the cash rate by 0.25 may have contributed to the rise in M1, M3 and private loans: according the latest report, M3 sharply rose in April to 3.2; M1 increased to 8.7. On the other hand, private loans contraction rate fell to -0.9%. So despite the rise in M1 and M3, private loans continue to fall;
Bank of Canada’s Overnight Rate: The Bank of Canada will make its decision regarding the Canadian overnight rate, which remained unchanged at 1%. The BOC may keep its policy and maintain its interest rate at 1%; the recent slowdown in Canada’s economy and the decision of other leading central banks such as ECB and RBA to cut their respective cash rates might also prompt BOC to reduce its cash rate;
Spanish 10 Year Bond Auction: Spain will issue its monthly bond auction; in the latest bond auction, which was held at the middle of April, the average rate reached 4.61% – a higher rate than in the previous bond auction;
Australia’s Building Approvals: In the previous report regarding March the buildings approvals declined by 5.5% compared to February. This report is another indication for the developments in the Australian housing market;
Australia Private New Capital Expenditure: This quarterly report shows the developments in the private new capital expenditures and expected expenditures for the first quarter of 2013. As of the latest quarter, the seasonal adjusted total of new capital expenditure decreased by 1.2% (Q-o-Q) but rose by 10% compared to the previous quarter in 2011;
Currencies / Bullion Market – May Update
The Euro/ USD slipped on Tuesday by 0.59% to 1.2856. During May, the Euro/USD decreased by 2.37%. Moreover, other currencies such as the Aussie dollar and Canadian dollar also depreciated yesterday against the U.S dollar by 0.37% and 0.78%, respectively. The correlations among gold, Canadian dollar and Aussie dollar weakened: during recent weeks the linear correlation between gold and USD/CAD reached -0.35 (daily percent changes); the linear correlation between the gold and AUD/USD was 0.53 (daily percent changes). If the Aussie, Canadian dollar and Euro continue to depreciate, they could adversely affect precious metals prices.
Current Gold and Silver Rates as of May 29th
Gold (short term delivery) is traded at $1,386 per t oz. a $6.3 or 0.46% increase as of 09:38*.
Silver (short term delivery) is at $22.24 per t oz – a 0.19% increase as of 09:38*.
Here is a reminder of the top events and publications that are scheduled for today and tomorrow (all times GMT):
09:00 – Euro Area Monetary Development
15:00 – Bank of Canada’s Overnight Rate
Tentative – Spanish 10 Year Bond Auction
02:30 – Australia’s Building Approvals
02:30 – Australia Private New Capital Expenditure
Tentative – Italian 10 Year Bond Auction
13:30 – Second Estimate of U.S GDP 1Q 2013
13:30 – U.S. Jobless Claims Weekly Report
15:00 – U.S. Pending Home Sales
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