Gold and Silver – Daily Outlook for November 1st

The low volatility of gold and silver ended yesterday as both precious metals prices tumbled down. Their recent fall nearly erased all their grains from the past month. Several theories may explain the recent fall including the renewed speculations that the FOMC might start taper QE3 at the end of the year, the drop in the Euro and the end of the month trade. In any case, on a monthly scale precious metals didn’t do much and remained flat. Yesterday, U.S. Jobless Claims weekly update came out: jobless claims fell by 10k to reach 340k. Will gold and silver bounce back on the first trading day of the week? On today’s agenda: Australia’s PPI, China Manufacturing PMI, HSBC’s China Manufacturing PMI, GB Manufacturing PMI, and U.S. Manufacturing PMI.

Here is a short overview of precious metals prices for Friday, November 1st:

Gold and Silver – October Review                             

On Thursday, gold plunged by 1.90% to $1,323.6; Silver also tumbled by 5.01% to $21.83. During October, gold decreased by 0.24%; silver rose by 0.68%. In the chart below are the normalized rates of precious metals for 2013 (normalized to 100 as of September 30th). The prices of gold and silver haven’t done much during the month.

Gold and silver Chart 2013  November 1The ratio between the two precious metals rose on Thursday to 60.63. During October, the ratio decreased by 0.92% as silver has moderately out-performed gold.

Gold  to silver ratio Chart 2013  November 1FOMC left policy unchanged

Even though the FOMC kept its policy unchanged and maintained its general tone about looking for improved economic outlook to taper QE3. Some analysts have considered the slight shift in the wording including the elimination of the phrase “tighter financial conditions” as indication that the Fed is more open to the idea of tapering QE3 in the last FOMC meeting of the year in December. This might explain the sharp fall in precious metals and the strengthening of the USD. But I remain skeptic about the Fed tapering QE3 this year.

The table below presents the precious metals market’s reaction to the FOMC statements in the past couple of years. As you can see, the recent fall in precious metals partly eliminated the rally of gold and silver from back in September.

FOMC statment and Gold Silver November 1On Today’s Agenda

Australia’s PPI: This quarterly update will pertain to third quarter of 2013. During the second quarter of 2013, the producer price index rose by 1.2% compared to the second quarter of 2012 and by 0.1% compared to Q1 2013; this index may affect the Aussie dollar;

China Manufacturing PMI: As of September, the Manufacturing PMI rose for fourth consecutive month to 51.1 – i.e. China’s manufacturing sectors are expanding at a slightly faster pace; in the last flash PMI report, the index rose to 50.9. If in the upcoming report the PMI continues to rise, it could signal growth in China’s manufacturing sectors, which could also positively affect oil and gold prices;

China Manufacturing PMI (HSBC’s final estimate): This will be HSBC’s last estimate for October’s PMI index. Last month’s Manufacturing PMI reached 50.2 – i.e. China’s manufacturing sectors is moderately expanding; the recent flash PMI report rose to 50.9 in October – the highest level in seven months. If the updated PMI index remains elevated or even higher than the flash index, this will suggest China’s manufacturing conditions are growing. Moreover, this shift could have a positive effect on the prices of gold;

GB Manufacturing PMI: This report will pertain to Great Britain’s manufacturing sector in October 2013. In the last update regarding September 2013 the index slipped to 56.7. This rate drop means the manufacturing sector is still growing but at a slower pace; this index might affect GB Pound;

U.S. Manufacturing PMI: This report will refer to October 2013. In September, the index increased again to 56.2% – the highest level in two years; this means the manufacturing is growing at a faster rate;

Currencies / Precious Metals Correlations – October Update

On Thursday, the Euro/ USD currency pair fell again by 1.1% to 1.3584. During October, the Euro/USD rose by 0.71%. Moreover, other currencies such as the Aussie dollar slightly depreciated yesterday against the U.S dollar by 0.31%. The correlations among gold, silver and Euro remained strong in recent weeks, e.g. the correlation between the Euro/USD and gold price is 0.61 during October. The chart below presents these correlations.

Correlation Gold and EURO USD 2013 November 1Here is a reminder of the main events and publications that are scheduled for today (all times GMT):


01:30 – Australia’s PPI

02:00 – China Manufacturing PMI

02:45 – HSBC’s China Manufacturing PMI

09:30 – GB Manufacturing PMI

15:00 – U.S. Manufacturing PMI

For further reading: