The prices gold and silver continue to shift with an unclear trend as both precious metals changed direction and edged up on Wednesday. Both precious metals have been zigzagging with unclear since September 13th, following the announcement of the Fed to launch QE3. Yesterday, the U.S non-manufacturing PMI report came out: the index rose again to 55.1, which means the non-manufacturing PMI sector continued to grow at a slightly faster pace. The ADP estimated that number of new jobs added in the U.S during September was 162k. If these figures will be close to the numbers presented tomorrow in the U.S non-farm payroll report, then this could help rally commodities and stock prices. Currently, the prices of gold and silver are rising. On today’s agenda include: Minutes of September’s FOMC Meeting, Great Britain Bank Rate & Asset Purchase Plan, ECB Euro Rate Decision, U.S. Jobless Claims , Bank of Japan – Rate Decision, French 10 Year Bond Auction.
Here is a short outlook for precious metals for Thursday, October 4th:
Precious Metals –October Update
On Wednesday, Gold changed direction from Tuesday and rose by 0.24% to $1,779.8; Silver also edged up by 0.06% to $34.69. During the week, gold edged up by 0.33%; silver, by 0.33%.
As seen below, the chart shows the changes of normalized prices of precious metals in the last several weeks (normalized to 100 as of September 13th). During the past several weeks the prices of gold and silver zigzagged with an unclear trend.
The ratio between the two precious metals rose on Wednesday to 51.31. During October, the ratio nearly didn’t change as gold performed much like silver.
On Today’s Agenda
Minutes of September’s FOMC Meeting: Following the recent FOMC meeting, in which it was decided to launch QE3, and to extend the Fed’s pledge of keeping the short term rates low until mid-2015, the bullion market reacted to this news – gold and silver hiked on the day of the announcement. The minutes of the recent FOMC meeting might add some additional perceptive and insight behind this decision and the future steps of the FOMC especially in anticipation of the upcoming FOMC meeting at the end of October;
French 10 Year Bond Auction: the French government will also issue a bond auction; in the recent bond auction, which was conducted during the first week of September, the average rate reached 2.21%;
Great Britain Bank Rate & Asset Purchase Plan: as of September BOE’s rate remained unchanged at 0.5% and the asset purchase plan was left at £375 billion;
ECB Euro Rate Decision: The last time the ECB decided to cut the rate was back in July when President of ECB, Mario Draghi announced the EU interest rate will be reduced by 0.25pp to 0.75%. Since many EU countries are still struggling, and since the FOMC decided on QE3, ECB might decide to make another rate cut in the near future by another 0.25pp. If ECB will cut the rate again, it may affect the Euro;
U.S. Jobless Claims: in the latest report the jobless claims declined by 26k to 359,000; this upcoming weekly report may affect the USD and consequently the rates of commodities;
BOJ –Monetary Policy Statement: Up to now, BOJ left the interest rate unchanged at 0 to 0.1 percent, but expanded its stimulus plan by additional 10 trillion yen. If the BOJ will introduce a new monetary stimulus plan (which is less likely), it could affect the Yen, other currencies and commodities rates;
Currencies / Bullion Market – October Update
The Euro/ USD slipped on Wednesday by 0.12% to 1.2905. During the month, the Euro/USD rose by 0.36%. Further, other currencies including Aussie dollar and Canadian dollar also depreciated yesterday against the USD by 0.5% and 0.35%, respectively. The correlation between gold and Euro and other “risk currencies” remains mid-strong and positive: during September/October, the linear correlation between the gold and EURO/USD was 0.61 (daily percent changes). As seen below, the linear correction between the Euro/USD and gold remained around the 0.6-0.7 in the past couple of months. If these currencies and the Euro will continue to trade up against the USD, then they are likely to pull up gold and silver. Currently, the Euro/USD is trading up.
Current Gold and Silver Rates as of October 4th
Gold (November 2012 delivery) is traded at $1,783.5 per t oz. a $0.2 or 0.21% increase as of 06:37*.
Silver (November 2012 delivery) is at $34.82 per t oz – a $0.13 or 0.37% increase as of 06:37*.
Daily Outlook for October 4th
The prices of precious metals changed direction again and rose on the third day of the week. This zigzag from gains to losses may change and could result in a rise in the price of gold and silver throughout the rest of the week. The upcoming publications of the minutes of the FOMC meeting could affect the prices of bullion. If the minutes will show that the FOMC may consider additional monetary steps in the near future, then they are likely to pull up bullion rates. The upcoming rate decisions mainly of BOE and ECB could adversely affect the British Pound and Euro, respectively, if these central banks will decide to lower their rates or if BOE will announce of a rise in its asset purchase plan. Such decisions, in turn, are likely to pull down the rates of precious metals. The ongoing speculation around Spain’s next move could affect not only the Euro, but also bullion rates. Today’s publication of the U.S. Jobless Claims could affect the USD, stocks and commodities if the report will show sharp drop in number of jobless claims. Finally, if the Euro and Aussie dollar will trade up, 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):
Tentative – French 10 Year Bond Auction
12:00 – Great Britain Bank Rate & Asset Purchase Plan
12:45 – ECB Press Conference and Euro Rate Decision
13:30 – U.S. Jobless Claims Weekly Report
19:00 – Minutes of September’s FOMC Meeting
Tentative – Bank of Japan – Rate Decision and Monetary Policy Statement
13:30 – Canada’s Employment Report
13:30 – U.S. Non-Farm Payroll Report
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