Gold and silver resumed their downward trend as both precious metals declined on Monday. Many other commodities such as oil also tumbled down. China flash Manufacturing PMI was released tonight and showed the index rose to 49.5 but still means the manufacturing is contracting. Nonetheless may positively affect commodities rates. The ongoing decline of the Euro is also pulling down bullion rates. Currently gold and silver are declining. On today’s agenda: Flash Euro Area Manufacturing PMI, Canada’s Retails Sales, Bernanke’s Speech, Flash U.S. Manufacturing PMI and Japan’s Trade balance.
Here is a short outlook for precious metals for Tuesday, July 24th:
Precious Metals – July Update
Gold declined on Monday by 0.34% to $1,577.4; Silver also decreased by 0.95% to $27.04. During July, gold fell by 1.67% and silver by 2.06%.
In the chart herein are the normalized rates of these precious metals during the month (normalized to 100 as of June 29th). As seen, during the last several weeks bullion presented an unclear trend.
The ratio between the two precious metals rose on Monday to 58.33. During July the ratio edged up by 0.4% as gold slightly out-performed silver.
On Today’s Agenda
Flash Euro Area Manufacturing PMI: This report will provide an indicator to the economic progress of the Euro zone’s manufacturing conditions; this news, in turn may affect the Euro/USD and consequently also bullion rates;
Retails Sales Canada: This report may affect the USD/CAD, which is strongly correlated with precious metals. In the previous report regarding April 2012, retails sales fell by 0.5%;
Bernanke’s Speech: Following last week’s testimonies of Bernanke at the Hill and the minutes of last month’s FOMC meeting, the bullion market continue to dwindle because none of these news items offer any hints as the next move of the FOMC. Therefore this speech will most likely not affect the markets. The title of the speech is “Early Childhood Education“;
Flash U.S. Manufacturing PMI: During June 2012 the ISM index declined to 49.7%, which means the manufacturing is contracting; this index might affect forex and commodities markets;
Japanese Trade balance: The Japanese trade balance deficit for May 2012 rose by 28.4% compared to April, and reach 657 billion YEN (roughly $8.31 billion) deficit (seasonally adjusted figures). This fall is due to the rise in imports by 1.9%, and the decline in exports by 0.5%; its trade balance could provide some information about Japan’s changes in demand goods and services;
U.S. Treasuries / Gold & Silver– July
The U.S. 10-year Treasury yield continues to decline and reached 1.47% on Monday. During July the 10 year treasury yield decreased by 0.20 percent point. The fall in LT securities yields may indicate the demand for “secure investments” continues to rise. During July there was a high and positive correlation between U.S. long term Treasury yield and bullion prices: the linear correlation between 10 year yields (percent change) and gold price reached 0.716; between 10 yr yield and silver was 0.612. The chart below suggests that if the LT U.S. treasury yield will continue to drop, it might indicate that precious metals rates will also follow and decrease.
Currencies / Gold & Silver Market – July Update
The Euro/US Dollar also declined on Monday by 0.34% to 1.2117. During the month (UTD) the Euro/USD decreased by 4.33%. Further, other currencies including Australian dollar and Canadian dollar also depreciated on Monday against the USD by 1.15% and 0.6%, respectively. The correlations between gold and the above-mentioned currencies pairs are still positive and robust: during July the correlation between the gold and Aussie dollar/USD reached 0.62 (daily percent changes). Therefore, if the Euro and AUD will continue to decline, they may also pull down precious metals rates. Currently, the Euro/USD is rising.
Current Gold and Silver Rates as of July 24th
Gold (August 2012 delivery) is traded at $1,576.2 per t oz. a $1.2 or 0.08% decrease as of 06:22*.
Silver (August 2012 delivery) is at $27.005 per t oz – a $0.037 or 0.14% decrease as of 06:20*.
Daily Outlook for July 24th
Gold and silver resumed their downward trend as both precious metals declined during the first day of the week. This drop coincided with the decline in other commodities and stock markets. The weak Euro is pulling down not only commodities prices but also other currencies such as Aussie dollar and CHF. If the Euro will continue at this direction it could adversely affect bullion. The ongoing fall in the U.S LT yields suggests traders are becoming more “risk averse”. This could also suggest bullion rates will suffer from this market sentiment. The upcoming reports regarding U.S Canada and EU could affect their respective currencies which in turn may affect precious metals rates. I still think the general direction of bullion rates will be downward unless there will be some breaking news.
Here is a reminder of the top events and publications that are scheduled for today and tomorrow (all times GMT):
09:00 – Flash Euro Area Manufacturing PMI
13:30 –Retails Sales Canada
13:45 – Bernanke’s Speech
14:00 – U.S. Flash Manufacturing PMI
00:50 – Japanese Trade balance
09:00 – German Business Climate Survey
09:30 – Flash GB GDP Q2 2012
Tentative – German 30 Year Bond Auction
15:00 – U.S. New Home Sales
15:30 – U.S Crude Oil Stockpiles Report
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