Gold and silver remained virtually unchanged in the Asian markets during yesterday and only slightly declined. As the year is coming closer to its end, the U.S is getting closer reaching the fiscal cliff. The talks on the Hill regarding this issue could contribute to a potential spike in the volatility of precious metals prices. Moreover, the holidays that could lead to a drop in volume is expected might increase the chance of a sudden spike in price volatility. Will gold and silver continue their downward trend? On today’s agenda: Bank of Japan Minutes of Monetary Policy and U.S S&P CS Composite.
Here is a short outlook for precious metals for Wednesday, December 26th:
Precious Metals – December Update
On Friday, gold rose by 0.86% to reach $1,659.4; the price of silver also rallied by 1.78% to reach $30.15. During the month, gold declined by 3.01%; silver, by 9.2%.
As seen below, the chart presents the changes in the normalized prices of precious metals during November and December (normalized to 100 as of November 30th). During recent weeks, the prices of silver and gold have had a downward trend.
The ratio between the two precious metals remained flat at 55.04. During the month, the ratio rose by 6.82% as gold slightly out-performed silver.
On Today’s Agenda
Bank of Japan –Monetary Policy Minutes: Bank of Japan will come out with the minutes of the recent monetary policy meeting and rate decision. In the recent meeting, BOJ decided to expand its asset purchase program by 10 trillion yen ($120 billion). The minutes could offer some insight behind the recent decision that could affect the Yen, other currencies and commodities;
U.S S&P CS Composite: This report estimates the changes in the selling price of single family in the top 20 metropolitan areas; this is another indicator for the changes in the inflation; in the recent report, the rate increased to 3%; this report could affect the U.S and consequently bullion prices;
Currencies / Bullion Market – December Update
The Euro/ USD edged down on Tuesday by 0.07% to 1.3179. During the month, the Euro/USD rose by 1.49%. Furthermore, some currencies such as Aussie dollar also depreciated yesterday against the USD by 0.35%. This trend of these “risk currencies” may have contributed to the weakness of precious metals. The correlations among gold, Euro and Aussie have significantly declined in recent weeks: during the month, the linear correlation between gold and Euro /USD reached 0.02 (daily percent changes); the linear correlation between the gold and USD/CAD was -0.19 (daily percent changes). This weak correlation might suggest the recent fall in gold and silver didn’t coincide with the movement of the USD. Nonetheless, if the Euro and other risk currencies will bounce back against the USD, they are likely to positively affect bullion rates.
Current Gold and Silver Rates as of December 26th
Gold (short term delivery) is traded at $1,659.5 per t oz. a $0.6 or 0.04% decrease as of 23:44*.
Silver (short term delivery) is at $29.9 per t oz – a $0.31or 1.01% decrease as of 23:44*.
(* GMT)
Daily Outlook for December 26th
The prices of gold and silver haven’t performed well in recent weeks. The speculations regarding Paulson’s future steps may have contributed to the downward trend of precious metals. Nonetheless, the weakness of gold and silver isn’t new as both metals haven’t done well in recent months. Even the FOMC decisions in recent months to launch QE3, QE3 plus didn’t help pull up the price of precious metals. This could imply that gold and silver will remain in their current price range in the days to follow. The ongoing debates between Congress and the White House regarding the multi-year budget in order to avoid the fiscal cliff along with the low trading volume could lead to a sharp spike in the price volatility of gold and silver in the days to come. Nevertheless, I still guess gold and silver will continue its downward trend in the days to follow. The upcoming U.S report regarding S&P CS Composite could affect not only the USD but also bullion prices. If this report will show the U.S economy is expanding, it could adversely affect gold and silver prices. Finally, if the Euro and other “risk currencies” will rally during the day against the USD, they are likely to pull up precious metals.
Here is a reminder of the top events and publications that are scheduled for today and tomorrow (all times GMT):
Today
23:50 – Bank of Japan –Monetary Policy Minutes
14:00 – U.S S&P CS Composite
Tomorrow
13:30 – U.S. Jobless Claims Weekly Report
15:00 – U.S Consumer Confidence
15:00 – U.S. New Home Sales
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