Gold and silver prices rose again in yesterday’s trading despite the drop in the other commodities prices such as oil prices and the depreciation of the Euro and Australian dollar against the US dollar. Today there is the ECB rate decision which might have a substantial effect on the forex markets. Currently, gold and silver are traded slightly up. Today, Great Britain Manufacturing Production will be published, Great Britain’s rate decision will be made, ECB will announce the interest rate for January, the weekly update U.S. unemployment claims will come out and U.S retail sales monthly report will be published.
Here is a market outlook of precious metals prices for today, January 12th:
Gold and Silver Prices –January Update
Gold price moderately rose on Wednesday by 0.50% to $1,639.6; silver price also rose by 0.25% to reach $29.89. In the chart below are the normalized gold and silver prices (gold and silver prices are normalized to December 30th). During January, gold price rose by 4.6% and silver price by 7.08%.
The ratio between gold and silver prices slightly increased on Thursday, January 12th and reached 54.85. During January the ratio decreased by 2.3% as silver price has slightly outperformed gold price.
Despite the sharp gains of gold and silver prices during the month, the volatility of these precious metals prices didn’t rise substantially and their standard deviations (of daily percent changes) are similar to the rates recorded in November and December 2011.
In today’s press conference the President of the European Central Bank, Mario Draghi will announce ECB’s basic interest rate for January and perhaps even a quantitative easing plan (yes, just like in the U.S.), these decisions will be made while the EU debt crisis continues to threaten the EU. The recent publication by Eu Stat showing that the Euro Area inflation rate declined to an annual rate of 2.8% (annual terms) in December despite ECB’s decision from last month to cut the EU rate to 1.00%, may be among the factors to tilt the odds towards another rate reduction. If ECB will cut again interest rates it is likely to pressure down the Euros to US dollar exchange rate and consequently might also affect gold and silver prices;
On Today’s Agenda
U.S. Unemployment Claims – weekly update: initial claims fell by 15,000 to 372,000 claims for the week ending on December 31st; the number of insured unemployment declined by 22k to 3.595 million during the week of December 24th;
U.S. Retail Sales Report: this report will present the monthly changes in the retail sales and food services for December; in the previous report, the retail sales, when controlling for the price changes, slightly increased by 0.2% from the previous month; (see here my review of the recent report).
Great Britain Bank Rate Decision : Bank of England will decide on its basic rate for January 2012 and the progress of its asset purchase plan; as of December the BOE’s rate remained unchanged at 0.5% and the asset purchase plan of £275 billion continued;
Forex Exchange Rate Trading / Gold & Silver Prices – January
The Euro to U.S Dollar changed direction and declined on Wednesday by 0.56% to reach 1.2706; furthermore, in yesterday’s trading the Australian dollar and Canadian dollar also depreciated against the U.S dollar. Today’s ECB rate decision will probably affect the Euro especially if there will be a rate cut. In such a case it may also affect the Australian dollar and Canadian dollar and consequently may also shift the direction of gold and silver prices. Currently, the Euro/USD is traded slightly up.
Current Gold and Silver Prices January 12th
The major precious metals prices are currently moderately rising in the European markets:
Current gold price per ounce short term future (February 2012 delivery) is traded at $1,648.60 per t oz. a $9 or 0.55% increase as of 07:36*.
Current silver price per ounce short term future (February 2012 delivery) is at $30.085 per t oz – a $0.195 or 0.65% increase as of 07:35*.
Gold and Silver Prices Outlook
Gold and silver prices moderately increased yesterday but this rally could change direction today if the ECB will announce a rate cut it could have an adverse effect on gold and silver prices. In last month’s rate decision, when ECB reduced the rate by 0.25 percent points, gold and silver prices declined along with the depreciation of the Euro (this relation should be taken with a grain of salt because correlation doesn’t necessarily means causation). Furthermore, if the ECB president will announce a QE plan it could also have a strong effect on the Euro. Finally, the upcoming U.S. reports including retail sales and weekly update on unemployment claims may also affect the forex trading and consequently gold and silver prices.
Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):
09:30 – Great Britain Manufacturing Production
12:00 – Great Britain Bank Rate & Asset Purchase Plan
13:30 –U.S. Unemployment Claims
13:30 – ECB Press Conference and Euro Rate Decision
13:30 – Changes in U.S. Retail Sales
15:30 – EIA U.S. Natural Gas Market Report
09:30 – Great Britain PPI Input
13:30 –Canadian Trade Balance
13:30 –American Trade Balance
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