Gold and silver continued their descent on Friday following the publication of the U.S PPI report in which the core producer price index rose by 0.2% during April; the core PPI tends to be negatively correlated with gold price and thus may have also contributed to the downfall of gold on the last trading day of the week. The political shift in Greece is keeping Euro investors anxious of what lies ahead. On today’s agenda: Euro Area Industrial Production, SNB Chairman Jordan’s Speech, Italian 10 Year Bond Auction and RBA’s Monetary Policy Meeting. Currently precious metals prices are declining.
Here is a short analysis for gold and silver prices for Monday, May 14th:
Gold and Silver– May Update
Gold price declined on Friday by 0.72% to $1,584; silver also decreased by 0.99% to $28.89. During the month gold decreased by 4.82% and silver by 6.85%.
The chart below shows the normalized prices of precious metals during month so far (gold and silver are normalized to 100 as of April 30th).
The ratio between two precious metals edged up again to 54.83. During the month the ratio increased by 1.91% as silver has moderately underperformed gold during May. In the chart below are the developments of this ratio during May.
According to the latest producer price index monthly update, which came out on Friday, the PPI for finished goods fell by 0.2% in April compared with March’s index.
This report serves as an indicator for the progress of the U.S core CPI to be published next week, May 15th.
On an annual scale, the PPI rose by 1.9% during the last 12 months
During April the food index edged up by 0.2%, while the energy index plummeted by 1.4%.
This means that most of the fall in the U.S PPI is attributed to the drop of the energy prices during last month.
On the other hand, the Producer Price index excluding food and energy increased by 0.2% during April 2012.
On Today’s Agenda
10:00– Euro Area Industrial Production: This report will present the changes in the industrial production of the EU during March; in the previous report the EU industrial production was up by 0.5% (M-O-M) during February;
16:45 – SNB Chairman Jordan’s Speech: the Swiss National Bank Chairman will hold a press conference; if he will announce of a sharp shift in the monetary policy of the SNB it could affect the Swiss Franc;
Tentative – Italian 10 Year Bond Auction: the Italian government will issue a bond auction; the previous bond sales, which were held at the last week of April, went well as the rate reached 5.84%;
12:30 – Monetary Policy Meeting Australia’s Bank: The minutes of the monetary policy meeting of the reserve bank of Australia presents the main factors that affected the board’s decision to cut the basic interest rate by 0.5 percent points to 3.75%; the minutes of this meeting may affect the Australian dollar currency and consequently major commodities prices including crude oil and gold prices;
Foreign Exchange / Gold & Silver Market – May Update
The Euro/U.S Dollar declined again on Friday by 0.15% to 1.2917. During the month so far the Euro/U.S Dollar decreased by 2.43%; furthermore, the Aussie dollar also depreciated on Friday against the U.S. dollar by 0.62%. Since these currencies pairs are strongly and positively correlated with bullion prices, if the U.S dollar will continue to appreciate against these currencies; this may further drag down gold and silver prices. Currently the Euro is declining against the USD.
Current Gold and Silver Prices as of May 14th
Gold (June 2012 delivery) is traded at $1,562.2 per t oz. a $21.8 or 1.38% decrease as of 10:10*.
Silver (June 2012 delivery) is at $28.315 per t oz – a $0.575 or 1.99% decrease as of 10:10*.
Daily Outlook for May 14th
Gold and silver prices are still showing weakness and are headed for the worst performing month this year (so far). I speculate bullion prices will continue their downward trend during today’s trading. The U.S PPI report may continue to have some adverse lingering effects on the bullion markets. The situation in Greece doesn’t help the Euro and thus drags along with it commodities prices. Finally, the upcoming report on the Euro Area industrial production might also adversely affect the Euro if it will be negative.
Here is a reminder of the top events and reports that are planned for today and tomorrow (all times GMT):
10:00– Euro Area Industrial Production
16:45 – SNB Chairman Jordan’s Speech
Tentative – Italian 10 Year Bond Auction
12:30 – Monetary Policy Meeting Australia’s Bank
10:00 –Euro Area ZEW economic sentiment
10:00 –German ZEW economic sentiment
10:00– Euro Area GDP 1Q2012 Report
13:30 –U.S Core Consumer Price Index
14:00 – U.S. TIC Long Term Purchases
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