The prices of gold and silver bounced back from their fall on Tuesday and slightly rose on Wednesday. The recent FOMC meeting ended with another tapering of $10 billion, so that the asset purchase program is now $65 billion a month. Will gold and silver change course again and decline? On today’s agenda: China Manufacturing PMI, KOF Economic Barometer, First U.S GDP 4Q 2013, U.S. Jobless Claims, U.S Pending Home Sales, and Australia’s PPI.
Here is a short overview for precious metals for Thursday, January 30th:
Gold and Silver – January Review
On Wednesday, gold slightly increased by 0.91% to $1,262.2; Silver, by 0.25% to $19.54. During January, gold increased by 4.98%; silver, by 1.02%. In the chart below are the normalized rates of bullion during January (normalized to 100 as of December 31st). The prices of gold and silver have slightly rose in recent weeks.
The gold and silver futures volumes of trade have increased and reached on Tuesday 258 thousand and 38 thousand, respectively. The volume of trade is likely to remain high for the rest of the week. The chart below shows the shifts in the volume of trade in the past several weeks.
FOMC Tapered by $10 billion QE3
The FOMC meeting ended yesterday after a two day meeting, in which, as many had anticipated, the FOMC continued to slowly taper QE3 by an additional $10 billion to $65 billion a month of long term asset purchase program. The Fed decided to maintain its tapering game plan in small increments. By doing so, the Fed reduces the uncertainty in the financial markets. The latest disappointing non-farm payroll report didn’t hold steer away the Fed from tapering this time. But if the next couple of non-farm payroll continue to show little growth in employment, this might eventually lead to a halt in the FOMC’s future tapering.
The table below shows the bullion markets’ reaction to the news of the FOMC’s decisions in recent years.
On Today’s Agenda
China Manufacturing PMI (HSBC’s final estimate): This is HSBC’s last estimate of its December’s PMI index. Last month’s Manufacturing PMI reached 50.5 – i.e. China’s manufacturing sectors is expanding at a slightly slower rate than before. If the updated PMI index falls again, this will suggest China’s manufacturing conditions aren’t improving;
KOF Economic Barometer: This monthly report estimates the developments in the Swiss economy in the upcoming months;
First U.S GDP 4Q 2013 Estimate: This will be the first estimate of U.S’s fourth quarter 2013 real GDP growth. In the previous estimate the U.S GDP rose by 4.1% in the third quarter of 2013 (it was revised up);
U.S. Jobless Claims Weekly update: In the previous report the jobless claims rose by 1k to reach 326k; this next weekly report may affect the U.S dollar and consequently commodities and stocks markets;
U.S Pending Home Sales: This report shows the developments in pending home sales in the U.S during December; in the previous update for November, pending home sales index inched up by 0.2% (month-over-month). This report is another signal for the progress in the U.S housing market; if the index starts to fall again, it may drag down the U.S dollar;
Australia’s PPI: This quarterly update will refer to fourth quarter of 2013. During the third quarter of 2013, the producer price index rose by 1.9% compared to the second quarter of 2012 and by 1.3% compared to Q2 2013; this index may affect the Aussie dollar;
Currencies / Precious Metals Correlations – January Update
On Wednesday, the Eur/USD currency pair slightly decreased by 0.1% to reach 1.3696. During January, the Eur/USD decreased by 0.58%. Moreover, other currencies such as the Aussie dollar and Canadian dollar also depreciated yesterday against the U.S dollar by 0.49% and 0.62%, respectively. Nonetheless, the correlations among gold, silver and Euro have remained weak in recent weeks, e.g. the correlation between the Euro/USD and gold price is only 0.06 during December/January. The correlation between USD/Yen and gold is -0.53. This could suggest the developments of the gold and silver prices have little to do with the changes in the forex market.
Here is a reminder of the main events and publications that are scheduled for today and tomorrow (all times GMT):
02:45 – China Manufacturing PMI
08:00 – KOF Economic Barometer
13:30 – First U.S GDP 4Q 2013 Estimate
13:30 – U.S. Jobless Claims
15:00 – U.S Pending Home Sales
01:30 – Australia’s PPI
10:00 – German Retail Sales
10:00 – EU CPI Flash Estimate
10:00 – EU Unemployment Rate
13:30 – Canada’s GDP by Industry
02:00 – China Manufacturing PMI
For further reading: