The prices of gold and silver bounced back from their tumble on the last day of November. Will gold and silver continue to trade up? Currently, the prices of gold and silver are falling. The recent release of the U.S manufacturing PMI report showed the U.S manufacturing sectors have contracted during last month. Reserve Bank of Australia announced it will cut the cash rate by 0.25pp to 3% – the lowest rate since 2009. On today’s agenda: Spain’s unemployment Change, Bank of Canada’s Overnight Rate, ECONFIN Meeting, and Australia’s GDP third quarter update.
Here is a short outlook for precious metals for Tuesday, December 4th:
Precious Metals –November Update
On Monday, the price of gold rose by 0.54% to $1,720.1; Silver price also bounced back by 1.5.2% to $33.71. During last month, gold declined by 0.48%; silver rose by 2.75%.
As seen below, the chart presents the developments in the normalized prices of precious metals during November and December (normalized to 100 as of October 31st). During recent weeks the price of silver slightly increased while the gold edged down.
The ratio between the two precious metals slipped on Monday to 51.03. During last month the ratio fell by 3.14% as gold under-performed silver.
On Today’s Agenda
Reserve Bank of Australia – Cash Rate Statement: the overnight money market rate of Australia’s Reserve Bank was cut by 0.25pp to3% – its lowest rate since 2009. This was the sixth rate cut in the past 14 months. This rate reduction is plausibly due to the economic slowdown in Australia. This news could lower the Aussie dollar and consequently precious metals prices;
Spain’s unemployment Change: the rate of unemployment of the Spain rose again by 128k. This mean, the employment situation in Spain isn’t improving;
Bank of Canada’s Overnight Rate: The Bank of Canada will also decide on the Canadian overnight interest rate, which currently stands at 1%. The recent slowdown in Canada’s economy might prompt BOC to lower the rate in the forthcoming rate decision;
ECONFIN Meeting: In the European Council Meeting the EU ministers of finance will meet and try to decide on a single supervisor bank for the bailout of commercial EU banks;
Australia’s GDP Q3 2012: In the second quarter 2012, the GDP grew by 0.6% (seasonally adjusted) – a decline in growth compared to the previous quarter. The slowdown in China’s economy might also adversely affect the growth of Australia’s GDP. If the GDP growth rate will dwindle again it could affect the strength of Aussie dollar (see here last report);
Currencies / Bullion Market – November Update
The Euro/ USD rose again on Monday by 0.52% to 1.3054. During November, the Euro/USD edged up by 0.2%. Moreover, some currencies such as Aussie dollar slightly depreciated yesterday against the USD by 0.07%. The recent decision of RBA to cut the cash rate is likely to pull back the Aussie dollar. As indicated in the chart below, the correlations among gold, Euro and Aussie are still strong: during recent months, the linear correlation between gold and Euro /USD reached 0.51 (daily percent changes); the linear correlation between the silver and AUD /USD was 0.39 (daily percent changes). Thus, if the Euro and other risk currencies will decline against the USD, they are likely to pull down gold and silver.
Current Gold and Silver Rates as of December 4th
Gold (short term delivery) is traded at $1,704.5 per t oz. a $16.6 or 0.96% decrease as of 06:40*.
Silver (short term delivery) is at $33.39 per t oz – a $0.37 or 1.11% decrease as of 06:40*.
Daily Outlook for December 4th
The prices of gold and silver bounced back on Monday but they are likely to resume their recent downward trend especially following the recent RBA rate cut. The ongoing concerns regarding the fiscal cliff could contribute to the volatility of bullion during the month. The recent manufacturing PMI may adversely affect commodities prices. The upcoming reports including: Spain’s unemployment Change, and Australia’s GDP could affect not only the Euro and Aussie dollar, respectively but also precious metals prices. If these reports will show these economies aren’t doing well, they could adversely affect their respective currency. This, in turn, could adversely affect precious metals prices. The upcoming rate decisions in Canada could affect the Canadian dollar, which is also linked with gold and silver. Finally, if the Euro and other “risk currencies” will fall against the USD, they are likely to drag down precious metals.
Here is a reminder of the top events and publications that are scheduled for today and tomorrow (all times GMT):
05:30 – RBA – Cash Rate Statement
08:00 –Spain’s unemployment Change
14:00 – Bank ofCanada’s Overnight Rate
All Day – ECONFIN Meeting
02:30 – Australian GDP Third Quarter 2012
13:15 – ADP estimate of U.S. non-farm payroll
15:00 – U.S. ISM Non-Manufacturing PMI
15:30 – U.S Crude Oil Stockpiles Report
Tentative – Spanish 10 Year Bond Auction
02:30 – Australia Employment Report
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