Following the Fed’s decision to keep its policy unchanged, the ECB surprised many investors and decided to lower its short term interest rate to an all time low of 0.50% – a 0.25pp reduction. This decision pulled down the Euro along with other risk related currencies such as Aussie dollar. Gold and silver prices, on the other hand, recovered from their tumble during May 1st after the FOMC decided to maintain its policy. The last big event of the week will unfold today as the non-farm payroll report will be published. Will gold and silver change direction and fall? Currently, the price of gold is falling. On today’s agenda: U.S. Non-Farm Payroll Report (update: 165k jobs added in April), EU Economic Outlook, U.S Factory Orders, U.S. ISM Non-Manufacturing PMI and BOC Gov Carney Speaks.
Here is a short outlook for precious metals for Friday, May 3rd:
Precious Metals – May Update
On Thursday, the price of gold increased by 1.48% to $1,467.6; Silver rose by 3.40% to $23.81. During the week, gold rose by 1.0%; silver, by 0.2%.
In the chart below are the normalized rates of gold and silver for the past several weeks (normalized to 100 as of April 11th). The prices of gold and silver slowly rallied in recent weeks.
The ratio between the two precious metals slipped on Thursday to 61.64. During the week, the ratio rose by 1.69% as gold out-performed silver.
The decision of the FOMC to keep its policy unchanged didn’t prevent the bullion market from changing directions: on the day the FOMC concluded its meeting, the prices of gold and silver tumbled down – perhaps as analysts speculated that the Fed might cut down on its current asset program. The following day (yesterday) bullion prices rallied along with other commodities and thus nearly regaining most the loss precious metals had on May 1st.
The table below shows the bullion market reaction to the recent FOMC decisions.
On Today’s Agenda
U.S. Non-Farm Payroll Report: in the recent report regarding March, the labor market sharply increased again: the number of non-farm payroll employment rose by only 88k; the U.S unemployment rate edged down to 7.6%; if in the upcoming report the employment will rise by more than 150 thousand jobs, this may pull down the rates of gold and silver (see here my last review on the U.S employment report);
The table above shows the market reaction to the news of the non-farm payroll report.
U.S Factory Orders: This report will show the shifts in U.S. factory orders of manufactured durable goods during April; in the previous report factory orders rose by 3%; this report will offer some insight regarding the growth of the U.S economy;
EU Economic Outlook: This report is updated three times of year and will show the economic forecast for the EU nations for the next couple of years; if the outlook will be improve, it could help pull up the Euro;
U.S. ISM Non-Manufacturing PMI: This monthly report will refer to the developments in the non-manufacturing sector during April 2013. For latest update, this index fell to 54.4% – this means the non-manufacturing is expanding and at a slower pace than in the previous month; this index may affect the USD;
BOC Gov Carney Speaks: Carney will participate in a panel discussion at the Cardus Convivium Project, in Toronto;
Currencies / Bullion Market – May Update
The Euro/ USD sharply fell on Thursday by 0.87% to 1.3065 – most likely as a response to the ECB rate decision. During the week, the Euro/USD rose by 0.3%. Moreover, other currencies such as the Aussie dollar and Canadian dollar also depreciated during yesterday against the U.S dollar by 0.29% and 0.22%, respectively. The depreciation of these currencies against the U.S dollar may have curbed the rally of precious metals on Thursday. The correlations among gold, Canadian dollar and Aussie dollar remained robust: during April/May the linear correlation between gold and USD/CAD was -0.65 (daily percent changes); the linear correlation between the gold and AUD/USD was 0.63 (daily percent changes).
Current Gold and Silver Rates as of May 3rd
Gold (short term delivery) is traded at $1,474.8 per t oz. a $7.2 or 0.49% increase as of 08:06*.
Silver (short term delivery) is at $24.10 per t oz – a 1.11% increase as of 08:06*.
(* GMT)
Here is a reminder of the top events and publications that are scheduled for today (all times GMT):
Today
10:00 – EU Economic Outlook
13:30 – U.S. Non-Farm Payroll Report
15:00 – U.S Factory Orders
15:00 – U.S. ISM Non-Manufacturing PMI
18:05 – BOC Gov Carney Speaks
For further reading: