Gold and silver changed direction and pace as both precious metals bounced back on Wednesday. Yesterday it was reported that, in Q2 2012 Great Britain’s Gross Domestic Product contracted by 0.7%. This news may have contributed to the rally the Euro and weakened the GBP. The rally of the Euro during yesterday coincided with the recovery of major commodities rates including oil and gold prices. New home sales declined by 8.4% during June (M-o-M). This news may have also positively affected precious metals rates. Currently gold and silver are rising along with the Euro following ECB President Mario Draghi’s pledge to preserve the Euro and do whatever it takes to do so. On today’s agenda: U.S. pending Home Sales, U.S Core Durable Goods, U.S. Jobless Claims Weekly report, Euro Area Monetary Development.
Here is a short outlook for precious metals for Thursday, July 26th:
Precious Metals – July Update
Gold hiked on Wednesday by 2.02% to $1,612.7; Silver also rose by 2.44% to $27.47. During July, gold rose by 0.53% while silver declined by 0.53%.
In the chart herein are the normalized rates of these precious metals during the month (normalized to 100 as of June 29th). As seen yesterday’s rally puts gold and silver very near their starting point from the beginning of the month.
The ratio between the two precious metals edged down on Wednesday to 58.72. During July the ratio rose by 1.06% as gold slightly out-performed silver.
On Today’s Agenda
Euro Area Monetary Development: In the previous May report, the annual growth rate for M3 rose to 2.9%; M1 also hiked to 3.3%. Finally, the annual growth rate of loans to private sector declined to -0.1%. The recent ECB rate cut may affect these figures; this news may also affect the Euro/USD and consequently commodities rates;
U.S. Jobless Claims Weekly Report: t; in the latest update the jobless claims rose by 34k to 386,000; this upcoming weekly report may affect the U.S dollar and consequently precious metals rates;
U.S Core Durable Goods: This report may indirectly present the changes in U.S. demand for commodities including crude oil. As of May 2012, new orders of manufactured durable goods rose by $2.7 billion to $217.4 billion; if this report will continue to be positive then it could strengthen the US dollar and also affect bullion prices;
U.S. Pending Home Sales: in the latest report the pending home sales index rose by 5.9% (M-over-M). These data are another indicator for the development in America’s real estate market; based on last week’s results on housing sales (existing) the pending sales may change direction and decline.
Currencies / Gold & Silver Market – July Update
The Euro/US Dollar hiked on Wednesday by 0.8% to 1.2158. During the month (UTD) the Euro/USD decreased by 4.01%. Further, other currencies including Australian dollar and Canadian dollar also appreciated on Wednesday against the USD by 0.85% and 0.65%, respectively. The correlations between gold and the above-mentioned exchange rates remain strong: during July the correlation between the gold and EURO/USD reached 0.69 (daily percent changes); the relation between silver and EURO/USD reached 0.65. Therefore, if the Euro and AUD will continue to rally, they may also pull up precious metals rates. Currently, the Euro/USD is rising.
Current Gold and Silver Rates as of July 26th
Gold (August 2012 delivery) is traded at $1,623.4 per t oz. a $10.7 or 0.66% increase as of 12:18*.
Silver (August 2012 delivery) is at $27.71 per t oz – a $0.244 or 0.89% increase as of 12:18*.
Daily Outlook for July 26th
The recent rally of gold and silver managed to nullify the decline these metals demonstrated during most of the month. The recovery of the Euro that may have contributed to the rise in bullion rates might be short lived. Unless there will be some positive reports coming from the EU, I suspect the direction will reverse during today’s trading. The upcoming U.S reports including core durable goods, pending home sales, jobless claims could signal the progress of the U.S economy and in turn may affect the strength of the USD. If there will be substantial changes from the previous reports, then they may also affect bullion rates. Keep in mind that if the USD will continue to appreciate, it could raise the chances of the FOMC intervening in the market with another QE program that will depreciate the USD.
Here is a reminder of the top events and publications that are scheduled for today and tomorrow (all times GMT):
09:00 – Euro Area Monetary Development
13:30 – U.S. Jobless Claims Weekly Report
13:30 – U.S Core Durable Goods
15:00 – U.S. Pending Home Sales
15:30 – EIA U.S. Natural Gas Storage Update
08:00 – KOF Economic Barometer
13:30 – First U.S GDP 2Q 2012 Estimate
For further reading: