The prices of gold and silver changed direction and bounced back from their recent downward trend. Their recent rise coincided with the rally of the Euro and other “risk currencies”. The U.S CPI rose by 0.6% during September. The core CPI rose by only 0.1%. There are speculations around the growth of China’s economy. According to the recent TIC report, the demand of foreigners for U.S treasuries rose in August by a net of $91.4 billion. This news may suggest that investors are more risk averse. Today’s (late at night) GDP report for Q3 may shed some light on China’s progress. Tomorrow, the EU Economic Summit will commence and could have a strong effect on the Euro and commodities prices. On today’s agenda: Claimant Count Change, Minutes of MPC Meeting, and U.S. Housing Starts and Building Permits.
Here is a short outlook for precious metals for Wednesday, October 17th:
Precious Metals –October Update
On Tuesday, Gold bounced back and rose by 0.5% to $1,746.3; silver also increased by 0.66% to $32.96. During the month, gold declined by 1.56%; silver, by 4.68%.
As seen below, the chart presents the developments of normalized prices of precious metals during September and October (normalized to 100 as of September 13th). During recent day both precious metals have had a downward trend.
The ratio between the two precious metals slipped on Tuesday to 52.98. During October the ratio increased by 3.28% as gold out-performed silver.
St. Deviation of Gold and Silver
The slow movement of both bullion rates is represented in the low volatility of precious metals prices’ during October: the standard deviations of gold and silver (daily percent changes) reached 0.63% and 1.15%, respectively. These figures are the lowest during 2012.
On Today’s Agenda
U.S. Housing Starts: this report was historically correlated with gold– as housing starts rise, gold price tended to decline the next day (even when controlling to the U.S dollar effect); in the previous report, the adjusted annual rate reached 733,000 in August 2012, which was 2.3% above July’s rate;
U.S. Building Permits: The recent report building permits declined by 1% (M-o-M) in the adjusted annual rate of building permits and reached 803,000 in August. If this report will continue to fall in the building permits rate, it may indicate that the U.S housing market (from this aspect) isn’t pulling up (the recent U.S building permits update);
China Third Quarter GDP: in the second quarter of 2012, China expanded by only 7.6% in annual terms; the current expectations are that the Q3 2012 grew in annul terms may even further fall; if the growth rate will be lower than in the previous quarter it may adversely affect commodities;
Claimant Count Change: This report will present the changes in the number of unemployed in GB; as of last month’s reports this figure had declined by 15k;
MPC Meeting Minutes: in the latest MPC meeting it was announced the rate will remain at 0.5% and the asset purchase program at £375 billion; the MPC still has concerns regarding GB’s inflation. The minutes of the previous meeting might offer some insight behind this decision;
Currencies / Bullion Market – October Update
The Euro/ USD bounced back on Tuesday by 0.8% to 1.3053. During the month, the Euro/USD rose by 1.51%. Further, several currencies including Aussie dollar also appreciated yesterday against the USD by 0.21%. The correlation between gold and Euro remains mid-strong and positive: during September-October, the linear correlation between the gold and EURO/USD was 0.50 (daily percent changes); the linear correlation between the gold and AUD/USD was 0.55 (daily percent changes). The recent rally of the Euro and Aussie dollar may have positively affected bullion prices yesterday. Thus, if the Euro and other risk currencies will continue to trade up, they are likely to pull up gold and silver.
Current Gold and Silver Rates as of October 17th
Gold (November 2012 delivery) is traded at $1,753 per t oz. a $6.7 or 0.38% increase as of 06:21*.
Silver (November 2012 delivery) is at $33.1 per t oz – a $0.141 or 0.43% increase as of 06:21*.
Daily Outlook for October 17th
The prices of precious metals changed direction and after they had declined for two consecutive business days, they rose on Tuesday. There are still concerns around the future growth of China, among the leading economies in importing gold. Today’s publication of China’s GDP could shed some light on this matter. Today’s publication of U.S housing starts could affect the USD and bullion prices. If the U.S will continue to show signs of progress, then the price of gold may fall. The upcoming EU Summit that will start tomorrow is likely to affect not only the forex market, but also commodities prices. Finally, if the Euro and other “risk currencies” will continue to rise, then they could also pull up the prices of precious metals.
Here is a reminder of the top events and publications that are scheduled for today and tomorrow (all times GMT):
09:30 – Claimant Count Change
09:30 – MPC Meeting Minutes
13:30 – U.S. Housing Starts
13:30 – U.S. Building Permits
03:00 –China Third Quarter GDP 2012
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
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