Gold and silver prices kicked off the week on a positive note as they have recovered some of the losses from last week but they are still at a low rate for the month. The rise in new home sales didn’t seem to slowdown the rally of bullion nor did it curb the decline of U.S stock markets. The speculation around the upcoming EU Summit to be held on June 28 and 29 continues to run high. German Chancellor Merkel continues to reject the joint Euro bloc bond sales. The upcoming debt sales in Spain and Italy might raise concerns over the EU debt crisis. In the meantime, Moody’s downgraded 28 Spanish Banks’ rating due in part to the country’s sovereign debt crisis. Nonetheless, the fall of the Euro didn’t seem to adversely affect precious metals. I suspect this sharp break in the relation between Euro/USD and bullion won’t last long. Currently gold and silver are rising. On today’s agenda: German Consumer Climate, Great Britain Net borrowing, Great Britain Inflation Hearings and U.S Consumer Confidence.
Here is a short analysis for gold and silver for Tuesday, June 26th:
Precious Metals –June Update
Gold price hiked on Monday by 1.37% to $1,588.4; silver also rose by 3.23% to $27.59. During the month gold increased by 1.55% while silver fell by 0.61%.
The chart below presents the normalized rates of these precious metals during June (normalized to 100 as of May 31st). The chart shows how both gold and silver declined during last week but bounced back yesterday.
The ratio between the two metals fell on Monday to 57.58. During the month the ratio rose by 2.17% as silver has slightly under-performed gold.
U.S. New Home Sales Rose in May
According to the recent about U.S new home sales, during May 2012 the annual rate of number of U.S new home sales rose by 7.6% to reach 369,000 (seasonally adjusted); this figure is also 19.8% above the annual rate in May 2011. This rally in new home sales is a positive sign for the slow recovery of the real estate market. This report may have been among the factors to appreciate the USD during yesterday.
On Today’s Agenda
U.S Consumer Confidence: according to the previous monthly update, the consumer confidence index declined in May (M-o-M). The current expectations are that the May index may decline; this report might affect commodities rates;
German Consumer Climate: Gfk group will publish their German consumer climate index. If this report will be positive it might also have a positive effect on the Euro;
Great Britain Net borrowing: this update will show the monthly developments in the public sector net borrowing for May 2012; as of April 2012, the net borrowing declined to -£18.8 billion;
Great Britain Inflation Hearings: this is a quarterly hearing of the MPC members in front of the Parliament’s Treasury Committee; the members will refer to the recent changes in GB’s inflation and their economic outlook. This hearing may affect the direction of the British pound;
Currencies / Gold & Silver Market – June Update
The Euro/US Dollar fell on Monday by 0.53% to 1.2504. During the month (UTD) the Euro/U.S Dollar increased by 1.12%. Furthermore, other exchange rates including the Aussie dollar and Canadian dollar also depreciated on Monday against the USD by 0.53% and 0.45%, respectively. The decline of Euro and Aussie dollar didn’t coincide with the rally of gold & silver rates on Monday. If the U.S dollar will continue to appreciate against these currencies, it may pull down bullion rates. Currently the Euro is declining against the USD.
Current Gold and Silver Rates as of June 26th
Gold (July 2012 delivery) is traded at $1,586.3 per t oz. a $2.1 or 0.13% decrease as of 23:19*.
Silver (July 2012 delivery) is at $27.48 per t oz – a $0.107 or 0.39% decrease as of 23:18*.
(* GMT)
Daily Outlook for June 26th
Gold and silver might have started off the week rising but I suspect this rally will be short lived. The ongoing concerns around the EU debt crisis and the appreciation of the USD are likely to pull down bullion rates. The upcoming US report could affect USD and commodities rates, especially if the report will show significant change. Finally the upcoming developments in Europe including the publications listed above and the debt sales of Italy and Spain are likely to affect not only the Euro/USD, which is strongly correlated with bullion rates, but also other foreign exchange rates such as Aussie dollar that are also linked with commodities markets.
Here is a reminder of the top events and publications that are scheduled for today and tomorrow (all times GMT):
Today
07:00 – German Consumer Climate
09:30 – Great Britain Net borrowing
10:00 – Great Britain Inflation Hearings
15:00 – U.S Consumer Confidence
Tomorrow
13:30 – U.S Core Durable Goods
15:00 – U.S. Pending Home Sales
15:30 – U.S Crude Oil Stockpiles Report
00:50 – Japan Retail Sales
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