The prices of gold and silver bounced back and rose yesterday following the recent FOMC decision to expand QE3 as the Fed will start purchasing long term treasuries at a pace of $45 billion per month. This purchase program is on top of the Fed’s $40 billion purchase program of mortgage backed securities. Will gold and silver continue to rise today? Currently, the prices of gold and silver are falling. On today’s agenda: EU Economic Summit, Libor Rate of Swiss National Bank, SNB Press Conference, ECB Monthly Bulletin, U.S. Jobless Claims Weekly update, U.S. Retail Sales Report, U.S PPI and China flash Manufacturing PMI.
Here is a short outlook for precious metals for Thursday, December 13th:
Precious Metals – December Update
On Wednesday, the price of gold rose by 0.48% to $1,716.6; Silver price also increased by 2.28% to $33.71. During the month, gold rose by 0.33%; silver, by 1.51%.
As seen below, the chart demonstrates the shifts in the normalized prices of precious metals during recent weeks (normalized to 100 as of November 16th). During recent weeks the prices of silver and gold slightly increased. 
The ratio between the two precious metals declined on Wednesday and reached 50.93. During the month, the ratio fell by 1.16% as gold slightly under-performed silver.
FOMC Expands QE3
The FOMC announced it will expand QE3 by start purchasing at the beginning of 2013 long term treasuries securities at a rate of $45 billion per month. This plan will substitute operation twist and will come in addition to the current $40 billion purchase plan of mortgage backed securities. The Fed also announced it will keep the short term rates low until the rate of unemployment will fall below 6.5%.
The table below shows the bullion markets’ reactions to the news of the FOMC during 2012. As seen, in the September FOMC meeting bullion rates hiked on the day of the announcement. This time, the prices of gold and silver rose by a lower rate than they did back in September.
This could imply this positive effect will dissipate today.
On Today’s Agenda
EU Economic Summit (two days meetings): EU ministers of finance will convene again in Brussels. Following Greek bailout decision, it lowers the chances that of any big decisions coming out of this meeting; in this Summits the EU ministers will discuss the proposal of European council president, Van Rompuy, on the “Genuine Economic and Monetary Union” and the multi-year EU budget;
Libor Rate of Swiss National Bank: the Swiss National Bank will announce its updated Libor rate; this decision could affect not only foreign exchange markets but also commodities markets if there will be a news in the currently low Libor rate (update: SNB left policy unchanged);
U.S. Jobless Claims Weekly update: in the recent update the jobless claims declined again by 25k to reach 370k; this upcoming weekly update may affect the U.S dollar;
U.S. PPI: in the latest report regarding October this index for finished goods edged down by 0.2% compared with September’s rate but rose by 2.3% in the last 12 months; this news might affect commodities;
U.S. Retail Sales Report: this report will presents the monthly changes in the retail sales and food services for November; in the recent report regarding October, the retail sales declined by 0.3% from the previous month;
China flash Manufacturing PMI: this index will cover 800 companies in 20 industries in China; based on the HSBC Manufacturing PMI report regarding November 2012 the Manufacturing PMI rose to 50.4; this index indicates the changes in China’s manufacturing sectors growth rate; if the index will further rise, this may positively affect commodities;
Currencies / Bullion Market – December Update
The Euro/ USD increased again on Wednesday by 0.56% to 1.3077. During the month, the Euro/USD rose by 0.7%. Moreover, some currencies such as Aussie dollar also appreciated yesterday against the USD by 0.26%. The correlations among gold, silver Euro and Aussie have weakened in recent days: during November/December, the linear correlation between gold and Euro /USD reached only 0.12(daily percent changes); the linear correlation between the gold and AUD /USD reached 0.2 (daily percent changes). Nonetheless, if the Euro and other risk currencies will continue to rally against the USD, they are likely to pull up gold and silver.
Current Gold and Silver Rates as of December 13th
Gold (short term delivery) is traded at $1,700.4 per t oz. a $17.5 or 1.02% decrease as of 08:16*.
Silver (short term delivery) is at $33.02 per t oz – a $0.77or 2.27% decrease as of 08:16*.
(* GMT)
Daily Outlook for December 13th
The prices of gold and silver rose yesterday following the recent FOMC decision. But the recent rise was much lower than the hike in gold and silver prices following the September FOMC meeting. This low reaction to the FOMC decision could imply the prices of gold and silver won’t continue to rise in the days to follow. Perhaps bullion investors are still waiting for the outcome of the budget talks in Congress. This could also imply the rally of gold and silver might resume only if there will be actual evidence for USD to devalue (i.e. a sharp depreciation of the USD or a hike in inflationary pressures).
The upcoming reports reading U.S. Jobless Claims, U.S. Retail Sales Report and U.S. Producer Price Index could affect the USD. If these reports will show the economy is progress it could pull up the USD. If China flash Manufacturing PMI will rise again, this could pull up commodities prices. Finally, if the Euro and other “risk currencies” will rise today against the USD, they are likely to positively affect precious metals.
Here is a reminder of the top events and publications that are scheduled for today and tomorrow (all times GMT):
Today
All Day – EU Economic Summit
08:30 – Libor Rate of Swiss National Bank
08:30 – SNB Press Conference
9:00 – ECB Monthly Bulletin
13:30 – U.S. Jobless Claims Weekly Report
13:30 –U.S. Retail Sales Report
13:30 – U.S. Producer Price Index
02:45– China flash Manufacturing PMI
Tomorrow
08:30 – German flash Manufacturing PMI
10:00 – Euro Area CPI
13:30 –U.S Core Consumer Price Index
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