Gold and silver prices continued their downward trend as the Euro and other currencies also tumbled down. The U.S existing home sales rose in April. European Leaders will convene today in order to talk about the EU debt crisis; they claims they will do all that is possible to keep Greece in the EU. The current speculation around the future steps of the EU leaders vis-a-vis Greece might be responsible for the current decline in commodities and stock markets in the U.S and Europe. BOJ announced it will keep the monetary policy unchanged – the yen is currently rising.On today’s agenda: U.S New Home Sales (update: housing sales rose in April), China’s manufacturing PMI (flash report), the Minutes of the recent MPC Meeting, and Canada’s Retails Sales report. Currently precious metals prices are falling down.
Here is a short outlook for gold and silver for Wednesday, May 23rd:
Precious Metals – May Update
Gold price declined again on Tuesday by 0.76% to $1,576.6; silver also fell by 0.5% to $28.18. During the month gold declined by 5.26% and silver by 9.15%.
The chart below shows the normalized rates of metals during month so far (both metals rates are normalized to 100 as of April 30th).
The ratio between the two metals declined on Tuesday to 55.95. During the month the ratio rose by 4.27% as silver has moderately under-performed gold during the month. In the chart below are the developments of this ratio during May.
As indicated in the chart below the linear correlation of the two metal daily percent changes is still strong and robust. During May the linear correlation of their daily percent changes is the highest in 2012 so far, which means the two metals’ relation has tighten in the past weeks.
According to the recent U.S existing home sales report for April the number of homes sold rose by 3.4% to a seasonally adjusted annual rate of 4.62 million home sales; this is a positive report that shows some slow paced progress in the U.S housing market.
This news might have been among the factors to drag down gold and silver prices.
On Today’s Agenda
U.S. New Home Sales: This report will present the developments in new home sales April 2012; in the previous update, the sales of new homes declined to an annual rate of 328,000 – a 7.1% decrease (month over month); if the number of home sales will continue to decline, it may further indicate a slowdown in the U.S real estate market which may also affect the strength of the US dollar.
Canada’s Retails Sales: This report may affect the USD/CAD currency pair, which is strongly correlated with bullion prices. In the previous report regarding February 2012, retails sales edged down by 0.2%;
China Manufacturing PMI: according to the HSBC Manufacturing PMI report for March the Manufacturing PMI slightly rose to 49.1; this index indicates the changes in China’s manufacturing sectors growth rate; if this negative growth will continue, this may also adversely affect precious metals prices;
MPC Meeting Minutes: Following the recent MPC meeting, in which it was announced the rate will remain unchanged at 0.5% and the asset purchase program, will remain at £325 billion, despite the concerns the MPC may have about the rising inflation. The minutes of the recent meeting might offer some perspective behind this decision and perhaps hint of the future steps of the MPC;
Forex / Gold & Silver Market – May Update
The Euro/U.S Dollar tumbled down on Tuesday by 1.04% to 1.2684 – the sharpest single day fall in over two months. During the month (UTD) the Euro/U.S Dollar declined by 4.19%; furthermore, the Australian dollar and Canadian dollar also depreciated during Tuesday by 1.08% and 0.30%, respectively. Since these currencies pairs are still correlated with precious metals prices, if the U.S dollar will continue to appreciate, bullion may also continue to trade down. Currently the Euro is edging down against the USD.
Current Gold and Silver Prices as of May 23rd
Gold (June 2012 delivery) is traded at $1,568.1 per t oz. a $8.5 or 0.54% decrease as of 23:34*.
Silver (June 2012 delivery) is at $28.165 per t oz – a $0.014 or 0.05% decrease as of 23:34*.
Daily Outlook for May 23rd
Gold and silver prices declined during most of the month so far and the speculation around the future steps of the Fed seems to have a lingering effect on the metals markets. It seems as if every report on the progress of the U.S economy (the latest coming from the real estate market) is influencing gold and silver traders on the possibility of another stimulus plan. I still think it’s only speculation and there is little evidence to support a Fed intervention in the near future. The upcoming report on the new home sales might continue to play a role in direction of precious metals prices. On the other hand the recent developments in Europe regarding the EU debt crisis are also having their own effect on the forex and commodities markets. If the EU Summit will bring some headlines that will calm the markets it might pull up the Euro and in turn curb the recent downward trend of bullion prices. The BOJ monetary policy decision might also affect the forex markets (and perhaps even commodities markets) if the Bank will decide on another stimulus plan.
Here is a reminder of the top events and reports that are planned for today and tomorrow (all times GMT):
09:30 – MPC Meeting Minutes
13:30 –Retails Sales Canada (March 2012)
15:00 – U.S. New Home Sales
15:30 – U.S Crude Oil Stockpiles Report
3:30– China flash Manufacturing PMI
09:00 – German Business Climate Survey
09:30 – GB revised GDP Q1 2012
13:30 – U.S. Jobless Claims Weekly Report
13:30 – U.S Core Durable Goods
14:00 – ECB President Draghi Speaks
15:30 – EIA U.S. Natural Gas Storage Update
For further reading: