Despite the high expectations that the Fed will make a change to its monetary policy, the Fed left its policy unchanged. This includes the Fed’s $85 billion a month asset purchase program. The speculations that the Fed might lower its asset purchase program may have been among the reasons for the sharp drop in the prices of precious metals. Will gold and silver bounce back? Currently, the price of gold and silver are rising. On today’s agenda: ECB Rate Decision (update: ECB cut the interest rate by 0.25pp to 0.5% – the lowest level in EU history; the Euro is tumbling down) , U.S. Jobless Claims, American Trade Balance and Canadian Trade Balance.
Here is a short outlook for precious metals for Thursday, May 2nd:
Precious Metals – May Update
On Wednesday, the price of gold fell by 1.77% to $1,446.2; Silver fell by 3.40% to $23.32. During the week, gold fell by 0.51%; silver, by 1.83%.
In the chart below are the normalized rates of gold and silver for the past month (normalized to 100 as of March 28th). The prices of gold and silver zigzagged in the past several days.
The ratio between the two precious metals rose again on Wednesday to 62. During the week, the ratio rose by 1.69% as gold out-performed silver.
On Today’s Agenda
ECB Rate Decision: ECB decided to cut its rate for May from 0.75% to 0.50% – a 0.25pp cut – an historic low. The last time the ECB cut the rate was back in July 2012. The recent hints of ECB President Mario Draghi along with the slowdown in the EU economy may have helped make this decision to cut the ECB rate.
American Trade Balance: This monthly report for March will present the developments in imports and exports of goods and services to and from the U.S, such as commodities such as oil and natural gas; based on the latest American trade balance report regarding February the goods and services deficit fell during the month to $43.0 billion;
U.S. Jobless Claims: this weekly report will refer to the week ending on April 27th; in the previous report the jobless claims rose by 16k to reach 339k; this upcoming weekly report may affect the U.S dollar and consequently bullion markets;
Canadian Trade Balance: In the previous report regarding February 2013, exports fell by 0.6% and imports inched up by 0.1%; as a result, the trade deficit widen from a $746 million deficit in January to $1.0 billion deficit in February; this report may affect the Canadian dollar which tends to be correlated with prices of precious metals;
Currencies / Bullion Market – May Update
The Euro/ USD slightly rose on Wednesday by 0.09% to 1.3180. During the week, the Euro/USD rose by 1.15%. Conversely, other currencies such as the Aussie dollar and Canadian dollar depreciated during yesterday against the U.S dollar by 0.89% and 0.10%, respectively. The depreciation of these currencies against the U.S dollar may have partly contributed to the fall of precious metals on Wednesday. The correlations among gold, Canadian dollar and Aussie dollar remained robust: during April/May the linear correlation between gold and USD/CAD was -0.70 (daily percent changes); the linear correlation between the gold and AUD/USD was 0.65 (daily percent changes). These correlations suggest the drop of precious metals rates was partly related to the shifts in the foreign exchange markets.
Current Gold and Silver Rates as of May 2nd
Gold (short term delivery) is traded at $1,453.7 per t oz. a $7.5 or 0.52% increase as of 05:18*.
Silver (short term delivery) is at $23.50 per t oz – a 0.65% increase as of 05:18*.
(* GMT)
Here is a reminder of the top events and publications that are scheduled for today and tomorrow (all times GMT):
Today
12:45 – ECB Rate Decision
13:30 – U.S. Jobless Claims
13:30 –American Trade Balance
13:30 – Canadian Trade Balance
Tomorrow
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: