Gold and silver bounced back and slightly increased yesterday after they had declined during most of the days in the past couple of weeks. The recent U.S jobless claims report showed a drop of 12k in jobless claims to reach 350k. Moreover, U.S real estate market showed some signs of growth as the U.S new home sales increased by 4.4% during November to reach 377k. On the other hand, consumer confidence report declined in December to 65.1 compared to 71.5 in November. This news may have had a mixed effect on the commodities markets during yesterday. Will gold and silver resume their downward trend? Currently, gold and silver are slipping. On today’s agenda: Italian 10 Year Bond Auction, French Consumer Spending and U.S pending home sales.
Here is a short outlook for precious metals for Friday, December 28th:
Precious Metals – December Update
On Thursday, gold slightly increased again by 0.17% to reach $1,659.9; the price of silver, also increased by 0.67% to reach $30.18. During the month, gold declined by 2.82%; silver, by 9.1%.
As seen below, the chart presents the developments in the normalized prices of bullion during December (normalized to 100 as of November 30th). In recent weeks, the prices of silver and gold have moderately declined.
The ratio between the two precious metals slightly slipped to 55.09. During the month, the ratio rose by 6.91% as gold out-performed silver.
The gold and silver futures volumes of trade have increased yesterday to 111 thousand and 38 thousand, respectively. This is a rise from the low trading volume recorded a day earlier. If the volume will continue to rise, this could suggest the odds of sudden sharp shifts in the prices of gold and silver due to low volume would fall. The chart below presents the volume of trading gold and silver futures in the CME in the past couple of weeks.
On Today’s Agenda
U.S. Pending Home Sales: in the last update, the pending home sales index rose by 5.2% (M-over-M). These data are another indicator for the progress in America’s housing market; if the housing data will show further growth it may pull up the U.S dollar;
Italian 10 Year Bond Auction: the Italian government will come out with its monthly bond auction; in the recent bond auction, which was held during the last week of November, the average rate reached 4.45% – the lowest rate in recent months; if the rate will decline, it could positively affect the Euro as it shows a vote of confidence in the EU;
French Consumer Spending: This report examines the developments in the changes in inflation adjusted value of goods consumed; in the previous report, the index edged down by 0.2% (month-over-month); this report may affect the Euro;
Currencies / Bullion Market – December Update
The Euro/ USD edged up on Thursday by 0.07% to 1.3233. During the month, the Euro/USD rose by 1.9%. Conversely, some currencies such as Aussie dollar depreciated yesterday against the USD by 0.01%. The correlations among gold, Euro and Aussie have remained very low during the month: the linear correlation between gold and Euro /USD reached -0.04 (daily percent changes); the linear correlation between the gold and USD/CAD was -0.07 (daily percent changes). This weak correlation might suggest the recent changes in gold and silver didn’t coincide with the developments of the USD. Nonetheless, if the Euro and other risk currencies will continue to rally against the USD, they are likely to have some modest positively effect on bullion rates.
Current Gold and Silver Rates as of December 28th
Gold (short term delivery) is traded at $1,662.5 per t oz. a $1.2 or 0.07% decrease as of 08:18*.
Silver (short term delivery) is at $30.23 per t oz – a $0.01or 0.03% decrease as of 08:18*.
Daily Outlook for December 28th
The prices of gold and silver remained nearly unchanged in recent days as they have shifted with an unclear trend. This low movement is likely to continue especially as the trading volume is picking up following the holiday break. The recent U.S reports including new home sales and jobless claims may have contributed to the strengthening of the USD against some currencies and thus may have curbed the recent rise in the prices of gold and silver. Nonetheless, as long as the movement of precious metals remains low, this could be just a matter of market shifts or noise. The FOMC decisions launch QE3, QE3 plus didn’t seem to rally the price of precious metals for now and might start to positively affect them in the months to follow. The debates around the fiscal cliff also seem, for the time being, to have little effect on precious metals or foreign exchange rates. The upcoming reports regarding U.S pending home sales, and French consumer spending could affect not the USD and Euro, respectively Moreover, if pending home sales will show the U.S economy is expanding, it could pull down gold and silver prices. Finally, if the Euro and other “risk currencies” will rally during the day against the USD, they are likely to help rise precious metals.
Here is a reminder of the top events and publications that are scheduled for today (all times GMT):
Tentative – Italian 10 Year Bond Auction
07:45 – French Consumer Spending
15:00 – U.S. Pending Home Sales
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