The prices of gold and silver jumped yesterday and reached their highest level since June. Their rally coincided with the depreciation of the US dollar against leading currencies such as Euro and Aussie dollar. Moreover, the tumble of leading U.S stock markets. The U.S CPI report showed a moderate rise in U.S inflation by 0.2%; the core CPI inched up by the same rate. The low growth in inflation suggests the Fed may keep its asset purchase program unchanged in order to maintain the potential growth in U.S economy. The Philly Fed index fell to 9.3, which is also not a good sign for the progress of the U.S . Jobless claims fell by 15k to reach 320k during the week ending on August 10th. Will gold and silver continue their upward trend? On today’s agenda: Euro Area CPI, Canada Manufacturing Sales, U.S. Housing Starts and Building Permits, and UoM Consumer Sentiment.
Here is a short breakdown for bullion market for Friday, August 16th:
Gold and Silver Prices Recap – August Update
On Thursday, gold jumped again by 2.02% to $1,361.10; Silver also spiked by 5.27% to $22.94. During August, gold rose by 3.71%; silver rallied by 16.85%.
In the chart below are the normalized rates of gold and silver for 2013 (normalized to 100 as of July 10th). The prices of gold and silver have rallied during August.
The ratio between the two precious metals tumbled down again on Thursday to 59.35. During August, the ratio fell by 11.24% as silver out-performed gold.
Despite the different percent changes of gold and silver, the linear correlation of the two precious metal daily percent remained strong and robust, as indicated in the chart herein. During August, the linear correlation of their daily percent changes reached its highest level in recent months.
Gold and silver futures volumes of trade remained low and reached on Thursday 127 thousand and 66 thousand, respectively. If the volume will continue to remain low, this could suggest the odds of sudden sharp movement in the prices of gold and silver due to low volume will diminish.
See here the weekly outlook for gold and silver for August 12-16.
On Today’s Agenda
Euro Area CPI: Based on the latest update the annual CPI rose to 1.6%, which is still below ECB’s target inflation; if the inflation will continue to rise, it could lower the odds of ECB cutting again its cash rate;
Canada Manufacturing Sales: This report will refer to the manufacturing sales in Canada as of June. It may affect the USD/CAD currencies pair. In the previous report regarding May 2013, manufacturing sales increased by 0.7%;
U.S. Housing Starts: This report was historically linked with gold – as housing starts falls, gold prices tended to rise the next day (even when controlling to the U.S dollar effect); in the latest monthly report, the adjusted annual rate reached 836,000 in June 2013, which was 9.9% below May’s rate;
U.S. Building Permits: In the previous update, during May building permits declined by 7.5% (M-o-M) as the adjusted annual rate of building permits reached 911,000. If building permits will continue to dwindle, it may indicate that the U.S housing market’s recovery (from this aspect) is slowing down (the recent U.S building permits update);
UoM Consumer Sentiment (preliminary):University of Michigan will publish its preliminary consumer sentiment monthly report; this survey could offer information regarding the latest developments in U.S consumers’ sentiment; According to the previous update, the sentiment index rallied to 83.9;
Currencies / Precious Metals – August Update
The Euro/ USD currency pair changed direction and rallied on Thursday by 0.69% to 1.3347. During the month (up-to-date), the Euro/USD rose by 0.34%. Moreover, other currencies such as the Canadian dollar and Aussie dollar also appreciated yesterday against the U.S dollar by 0.35% and 0.21%, respectively. The correlations among gold, Euro and Aussie dollar have weakened, e.g. the correlation between the Euro/USD and gold price was 0.38 during recent weeks. This means the effect the changes in the forex market has on bullion prices has diminished. The table below shows the linear correlations among precious metals and leading currencies pairs.
Current Gold and Silver Rates as of August 16th
Gold (short term delivery) is traded at $1,366.30 per t oz. a $5.4 or 0.40% increase as of 01:42*.
Silver (short term delivery) is at $22.99 per t oz – a 0.22% increase as of 01:42*.
(* GMT)
Here is a reminder of the top events and publications that are scheduled for today (all times GMT):
Today
10:00 – Euro Area CPI
13:30 – Canada Manufacturing Sales
13:30 – U.S. Housing Starts
13:30 – U.S. Building Permits
14:55 – UoM Consumer Sentiment
For further reading: