Gold price declined again for the second consecutive day. Silver, on the other hand edged up. The recent minutes of the June FOMC meeting didn’t provide any hints of possible implementations of QE program in the near future. Several FOMC members also voiced their concerns over the effects the stimulus plans will have on the long term inflation pressures. American Trade Balance was published yesterday and showed a mixed signal: there was a decline of $1.9 billion in the deficit during May compared to April; the deficit reached in May $48.7 billion; the decline was due to a rise in exports and a fall in imports. Currently gold and silver are declining. There are many items on today’s agenda including: China Second Quarter GDP 2012, ECB Monthly Bulletin, U.S. Jobless Claims (update: Jobless claims fell to 350k), Great Britain 10 Year Bond Auction, and ECB President Draghi will give a speech.
Here is a short outlook for precious metals for Thursday, July 12th:
Precious Metals – July Update
Gold declined on Wednesday by 0.26% to $1,575.7. Silver rose by 0.52% to $27.02. During July, gold declined by 1.78% and silver by 2.13%.
The chart below presents the normalized rates of these precious metals during July (normalized to 100 as of June 29th).
Despite the different directions gold and silver took yesterday, the linear correlation of the two precious metals daily percent changes is still strong and robust, as indicated in the chart herein. During July the linear correlation of their daily percent changes reached the highest level in 2012 so far, which means the two metals’ relation has tighten in recent weeks.
On Today’s Agenda
China Second Quarter GDP 2012: the current expectations are that the Q2 2012 grew in annul terms by only 7.5%; if the growth rate will be lower than in the previous quarter it might adversely affect commodities prices;
U.S. Jobless Claims: in the latest report the jobless claims declined by 14k to 374,000; this upcoming weekly report may affect the U.S dollar and consequently bullion rates;
ECB Monthly Bulletin: This monthly report for June 2012 analyzes the economic developments of the Euro Area including price stability, interest rate decisions and government’s debt; this report might provide some insight into the updated expectations of the Euro Area growth;
Great Britain 10 Year Bond Auction: the British government will issue another bond auction; in the previous bond auction, which was held at the end of June, the rate reached 1.92%;
ECB President Draghi Speaks: Mario Draghi will give a speech at the Euro-system Seminar with Mediterranean Countries’ Central Banks, in Casablanca;
Currencies / Gold & Silver Market – July Update
The Euro/US Dollar edged down on Wednesday by 0.09% to 1.2239. During the month (UTD) the Euro/USD declined by 3.37%. Alternatively, other exchange rates such as the Australian dollar and CAD appreciated on Wednesday against the USD by 0.6% and 0.05%, respectively. This mixed trend might explain the different directions of gold and silver. There is still a very strong relation among Euro/USD gold and silver. The linear correlation between gold and Euro/USD is 0.64 (daily percent changes, for June/July). If the Euro/USD will continue to fall, it could pull down precious metals rates.
Current Gold and Silver Rates as of July 12th
Gold (August 2012 delivery) is traded at $1,568.6 per t oz. a $7.1 or 0.45% decrease as of 07:12*.
Silver (August 2012 delivery) is at $26.865 per t oz – a $0.158 or 0.58% decrease as of 07:12*.
Daily Outlook for July 12th
Gold and silver continue to zigzag with an unclear trend as they did during the past few days. This zigzag is not only in the bullion markets but also in other commodities markets such as crude oil and natural gas. The minutes of the FOMC meeting didn’t provide any hints for a possibility of QE3 in the near future. Therefore precious metals might further decline during the remainder of the week.
T upcoming GDP report of China could affect the commodities markets; if the report will show a lower growth rate in Q2 than in Q1, this could pull down major commodities rates. The U.S jobless claims could affect the forex markets which in turn could also affect precious metals. Finally, if the Euro and other risk currencies will continue to decrease, then they are likely to also pull down bullion prices.
Here is a reminder of the top events and publications that are scheduled for today and tomorrow (all times GMT):
9:00 – ECB Monthly Bulletin
13:30 – U.S. Jobless Claims Weekly Report
Tentative – Great Britain 10 Year Bond Auction
18:00 – ECB President Draghi Speaks
03:00 –China Second Quarter GDP 2012
13:30 – U.S. Producer Price Index
14:55 – UoM Consumer Sentiment (preliminary)
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