Gold and silver changed direction and declined on the second day of the week. Moreover, other commodities such as crude oil and natural gas also fell yesterday. The main event from yesterday was the decision of the Reserve Bank of Australia to cut its interest rate by 0.25pp from 3% to 2.75% – its lowest level in years. This decision dragged down the Aussie dollar by nearly 0.67% and may have also contributed to the recent fall of commodities prices. In other news, the Germany factory orders rose during April. This news may have pulled up the Euro/USD yesterday. Will gold and silver changed course and rally? On today’s agenda: China’s Trade Balance, U.S 10 Year Bond Auction, and China’s CPI.
Here is a short outlook for precious metals for Wednesday, May 8th:
Precious Metals – May Update
On Tuesday, the price of gold changed direction and fell by 1.31% to $1,448.8; Silver also decreased by 0.61% to $23.79. During the month, gold declined by 1.59%; silver, by 1.47%.
In the chart below are the normalized prices of precious metals for 2013 (normalized to 100 as of April 11th). The prices of gold and silver haven’t performed well in the past several days.
The slow movement of both precious metals rates is represented in the decline in gold and silver prices’ volatility during the past couple of weeks: during May, the standard deviations of gold and silver (daily percent changes) reached 1.29% and 2.03%, respectively.
U.S 10 Year Bond Auction: the U.S government will issue its monthly bond auction; in the previous auction, which was held at the second week of April, the average rate reached 1.80% – much lower than in the previous auction;
China’s Trade Balance: according to the recent monthly report, China’s trade balance tumbled down to a $0.9 billion deficit; if the deficit will further rise, it could indicate that China’s economic growth is slowing down;
China‘s CPI: during March, the Chinese inflation rate rose to an annual rate of 2.1%; this rate is well below China’s inflation target of 4% in annual terms. The sharp drop in inflation is another indication for a slowdown in the economic activity in China. If the inflation will continue fall, it could indicate that China’s economic progress is cooling down; China is among the leading countries in importing commodities such as gold;
Currencies / Bullion Market – May Update
The Euro/ USD edged up on Tuesday by 0.02% to 1.3079. During May, the Euro/USD declined by 0.68%. Conversely, other currencies such as the Aussie dollar depreciated yesterday against the U.S dollar by 0.67%. The depreciation of these currencies against the U.S dollar may have partly contributed to the fall of gold and silver during yesterday. The correlations among gold, Canadian dollar and Aussie dollar remained robust: during April/May the linear correlation between gold and USD/CAD was -0.67 (daily percent changes); the linear correlation between the gold and AUD/USD reached 0.61 (daily percent changes). These correlations suggest the recent decline of precious metals prices was partly correlated to the changes in the foreign exchange markets.
Current Gold and Silver Rates as of May 8th
Gold (short term delivery) is traded at $1,451.8 per t oz. a $3 or 0.21% increase as of 08:01*.
Silver (short term delivery) is at $23.82 per t oz – a 0.04% increase as of 08:01*.
Here is a reminder of the top events and publications that are scheduled for today and tomorrow (all times GMT):
Tentative –China’s Trade Balance
Tentative – U.S 10 Year Bond Auction
15:30 – U.S Crude Oil Stockpiles Weekly Update
Tentative – China’s CPI
02:30 – Australia Employment Report
09:00 – ECB Monthly Bulletin
09:30 – Great Britain Manufacturing Production
Tentative – Spanish 10 Year Bond Auction
12:00 –BOE Rate Decision & Asset Purchase Plan
13:30 – U.S. Jobless Claims
15:30 – EIA U.S. Natural Gas Storage Update
00:50 – Japan Current Account
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