The rates of silver and gold declined during last week. The CME market was closed yesterday on account of the U.S holiday. Will gold and silver resume their downward trend? Currently gold and silver are edging up. The minutes of the RBA monetary policy meeting was released yesterday. This report may affect the Aussie dollar, which is strong linked with precious metals rates. On today’s agenda: German ZEW economic sentiment and Japanese Trade balance.
Here is a short outlook for precious metals for Tuesday, February 19th:
Precious Metals – February Update
On Friday, the price of gold sharply declined by 1.55% to $1,609.5; Silver also tumbled down by 1.66% to $29.85. During the month, gold decreased by 3.11%; silver, by 4.74%.
In the chart below are the normalized prices of gold and silver during February (normalized to 100 as of January 31st). The prices have declined in recent weeks.
The slow movement of both bullion prices is represented in the drop in precious metals prices’ volatility during February: the standard deviations of gold and silver (daily percent changes) reached 0.61% and 1.12%, respectively.
On Today’s Agenda
German ZEW economic sentiment: The upcoming report will pertain to the ZEW indicator of economic sentiment for Germany for February. In January the ZEW indicator for Germany rose to reach 31.5 points; if Germany’s economic sentiment will further grow, the Euro will plausibly strengthened against other currencies including the USD;
Japanese Trade balance: The Japanese trade balance deficit for December declined by 6% compared to November, and reach 800 billion YEN (roughly $8.7 billion) deficit (seasonally adjusted figures). This fall is due to the higher rise in exports (by 2.4%) than in imports (by 1.2%). Japan is among the leading importers countries of commodities, including gold; its trade balance could offer some insight regarding Japan’s developments in demand goods and services;
Currencies / Bullion Market – February Update
The Euro/ USD edged down on Monday by 0.07% to 1.3351. During the month, the Euro/USD fell by 1.68%. Moreover, some currencies such as Japanese yen and Canadian dollar also slightly depreciated yesterday against the USD by 0.49% and 0.43%, respectively. The recent depreciation of Euro and other “risk currencies” may have influenced bullion traders. The correlations among gold, Canadian dollar and Japanese yen remained stable in recent weeks: during January/February, the linear correlation between gold and USD/CAD reached -0.269 (daily percent changes); the linear correlation between the gold and USD/Yen reached -0.22 (daily percent changes). These mid-strong correlations suggest the developments in gold and silver markets were partly affected or resulted from the shifts in the foreign exchange markets. Thus, if the Euro and other currencies will further depreciate against the USD, they might adversely affect gold and silver.
Current Gold and Silver Rates as of February 19th
Gold (short term delivery) is traded at $1,613.4 per t oz. a $4 or 0.25% increase as of 09:00*.
Silver (short term delivery) is at $30.0 per t oz – a $0.15 or 0.49% increase as of 09:00*.
Daily Outlook for February 19th
Prices of precious metals tumbled down since the beginning of the month mainly due to their decline last week. The U.S dollar appreciated against leading currencies during the month, but I still think the shifts in the foreign exchange markets have had a limited affect on precious metals prices. The upcoming Japanese trade balance report could affect the Japanese yen, which has a mid-strong correlation with bullion rates. Tomorrow the minutes of the January FOMC meeting might offer some insight on whether the FOMC members wish to put a time limit on the Fed’s current QE3 program. In such an event, precious metals prices might react to this news and fall. Finally, if the Euro and other “risk currencies” will continue to depreciate during the week against the USD, they might pull down precious metals.
Here is a reminder of the top events and publications that are scheduled for today and tomorrow (all times GMT):
10:00 –German ZEW economic sentiment
23:50 – Japanese Trade balance
09:30 – Claimant Count Change
09:30 – Minutes of MPC Meeting
Tentative – German 10 Year Bond Auction
13:30 – U.S. Housing Starts
13:30 – U.S. Building Permits
13:30 – U.S. Producer Price Index
19:00 – Minutes of January’s FOMC Meeting
For further reading: