Gold and silver prices continued their upward trend as they have ended yesterday’s trading with gains. France and Spain will commence their long term bond sales in an attempt to raise as much as €9.5 billion and €4.5 billion worth of debt, respectively. If this debt auction will go well, the Euro might trade up today. Currently, gold and silver are traded down. Today, the following reports will come out: the U.S. core CPI, the ECB Monthly Bulletin, the U.S. Housing Starts and building permits report, U.S. unemployment claims, and Philly Fed manufacturing index.
Here is a market outlook of precious metals prices for today, January 19th:
Gold and Silver Prices –January Update
Gold price rose on Wednesday by 0.26% and reached $1,659.9; silver price also increased by 1.35% and reached $30.54. During January, gold price increased by 5.9% and silver price by 9.41%.
In the chart below are the normalized gold and silver prices (gold and silver prices are normalized to December 30th). The chart presents the upward trend of these precious metals during January.
The ratio between gold and silver prices slightly slipped on Wednesday, January 18th and reached 54.35. During January the ratio declined by 3.2% as silver price has slightly outperformed gold price.
On Today’s Agenda
U.S. Unemployment Claims: initial claims increased by 24,000 to 399,000 claims for the week ending on January 7th; the number of insured unemployment increased by 19k to 3.628 million during the week of December 30th; the upcoming report may affect commodities traders;
U.S core Consumer Price Index: This monthly report will present the main changes in the core consumer price index during December. According to the U.S Bureau of Labor statistics for November, the core CPI increased by 0.2% (M-o-M) and rose over the last 12 months by 2.2%;
U.S. Housing Starts & Building Permits: the U.S Census Bureau will publish the U.S housing starts and building permits report; the housing starts figure was historically correlated with gold price – as housing starts rose, gold prices tend to fall the following day (even when controlling to the U.S dollar effect); in the previous report, the adjusted annual rate reached 685,000 in November 2011, which is 9.3% above October’s rate of 627,000; the building permits also rose in last month’s report(see here the recent review);
Philly Fed Manufacturing Index: This survey provides an indicator for the economic growth of the US economy as it measures the manufacturing conditions of the US. In the previous December survey, the report showed the growth rate moderately increased to +10.3 in November 2011. If this index will change substantially from last month’s index, this may affect not only the U.S Dollar but also the development of gold price (see here last report);
Forex Exchange Rate Trading / Gold & Silver Prices – January
The Euro to U.S Dollar sharply increased yesterday by 0.99% to reach 1.2863; if the debt auctions of France and Spain will go well, it could further help the Euro to remain strong against the U.S. dollar. Thus, if the Euro and other leading currencies such as Australian dollar will appreciate against the U.S. dollar it may keep gold and silver prices rising. Currently, the Euro/USD is traded up.
American Stock Markets / Gold & Silver Prices – January
The S&P500 index rose Wednesday by 1.11% to 1,308.04 – the highest level since July 26th, 2011. Other leading indexes also rose yesterday including the Dow and NASADQ. Since the S&P500 index is strongly and positively correlated to gold price and silver price, if the stock market will continue to increase, this might also indicate that gold and silver prices will also rise. The chart below shows the development of the linear correlation between gold price and S&P500 index during 2011-2012 (moving linear correlations).
U.S. Treasuries / Gold & Silver Prices – January
The U.S. 10-year Treasury yield bounced back and rose on Wednesday by 0.05 percent points to 1.92%; during January the 10 year treasury yield declined by 0.05 percent point. This gain might indicate that the risk appetite in the markets has risen. In recent months there seems to be positive linear correlations between the daily percent changes of U.S. 10 year notes yield and precious metals prices (during January, the linear correlations for 10 year note yields and gold price and silver price is 0.55 and 0.634, respectively). If the LT U.S. treasury yield will continue to rise, it may also indicate that gold price and silver price will tend to increase.
Current Gold and Silver Prices January 19th
The major precious metals prices are currently traded slightly down in the U.S. markets:
Current gold price per ounce short term future (February 2012 delivery) is traded at $1,655.60 per t oz. a $4.3 or 0.26% decrease as of 14:34*.
Current silver price per ounce short term future (February 2012 delivery) is at $30.405 per t oz – a $0.138 or 0.45% decrease as of 14:34*.
(* GMT)
Gold and Silver Prices Outlook
Gold and silver prices continued yesterday their upward trend they have demonstrated during most of January (UTD). The rally of the Euro against the U.S. dollar is probably among the factors to help keep the upward trend in precious metals prices. If the Euro and Australian dollar will continue this trend, it may help keep gold price and silver price rising during the day. Finally, the upcoming U.S. reports including the Philly Fed Survey, Housing starts, U.S. unemployment claims and U.S. CPI may adversely affect the direction of gold and silver prices as I have analyzed in the past.
Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):
Today
9:00 – ECB Monthly Bulletin
13:30 – Department of Labor Report – U.S. Unemployment Claims
13:30 –U.S core Consumer Price Index
13:30 – U.S. Housing Starts
13:30 – U.S. Building Permits
15:00 – Philly Fed Manufacturing Index
Tomorrow
13:00 – Canada’s Core CPI
15:00 – U.S. Existing Home Sales
For further reading:
- Gold and Silver Prices Outlook for January 2012
- Weekly Outlook for 16-20 January
- Gold and Silver Prices Weekly Outlook for January 16-20
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About the Author: Lior Cohen, M.A in Economics, a commodities analyst and blogger at Trading NRG.