Gold and silver prices declined following the ECB decision to cut interest rate by 0.25pp to 0.75% and deposit rates from 0.25% to zero. This news also adversely affected the Euro/USD. Several U.S reports were published yesterday: U.S jobless claims fell to 374k during last week; U.S non-manufacturing ISM declined by 1.6 pp to 52.1%, which still shows growth but at a slightly slower pace. These items’ effects on the markets were plausibly crowded out by the ECB rate cut. Britain also changed its monetary policy as the British Monetary Policy Committee extended the Asset purchase plan by £50 billion to £375 billion. The U.S employment report came out today: the number of jobs added was only 80,000.This news could affect not only bullion markets but also other financial markets. Other items on today’s agenda: Swiss National Bank Forex Reserves, Great Britain PPI Input, and Canada’s Employment Report.
Here is a short outlook for gold and silver for Friday, July 6th:
Precious Metals – July Update
Gold price decreased on Thursday by 0.76% to $1,609.4; silver also fell by 2.16% to $27.67. During July, gold rose by 0.32% and silver by 0.21%.
The chart below presents the normalized rates of these precious metals during the past few weeks (normalized to 100 as of June 20th).
Despite the sharp movements in the bullion markets during the week, during July the volatility of precious metals prices wasn’t higher than in recent months, as their standard deviations (daily percent changes) during the month are very similar to the standard deviations in previous months.
U.S. Non-Farm Payroll Report: in the recent report regarding June 2012, the labor market didn’t grow much and the number of non-farm payroll employment increased by only 80k; the U.S unemployment rate remained at 8.2%; this report might affect not only the U.S dollar, but also gold and silver prices (see here my last review on the U.S employment report).
The table below shows the relation between the announcements of bullion rates and the results of the publications of the U.S non-farm payroll. If these negative relations will hold and the results of the June report could mean bullion rates will rise. But following the recent FOMC meeting in which the option of another QE in the near future became very low, we might see a shift in the relation between the US employment report and bullion rates. If these reports will drag commodities and stocks markets down, then these markets might also adversely affect precious metals rates.
Swiss National Bank Forex Reserves: the central bank of Switzerland will publish the total value of its foreign currencies reserves during June;
Great Britain PPI Input: this report will present the yearly rate of GB’s producer price index for June 2012; in the last report regarding May the input price declined by 2.5% (M-2-M); this news may affect the British Pound;
Canada’s Employment Report: In the previous report for May, unemployment remained 7.3%. The upcoming report might affect the Canadian dollar and consequently also affect the rates of commodities (see here the recent report);
Currencies / Gold & Silver Market – July Update
The Euro/US Dollar tumbled down on Thursday by 1.09% to 1.2391. This decline came after the ECB had decided to cut the interest rate by 0.25 pp to 0.75%. During the month (UTD) the Euro/U.S Dollar decreased by 2.17%. Alternatively, other exchange rates such as the Aussie dollar slightly appreciated on Thursday against the USD by 0.1%. There is still a very high linear correlation between Euro/USD and gold. The linear correlation between the two is 0.627 (daily percent changes, for June/July). If the Euro/USD will continue to fall, it could adversely affect bullion rates. Currently the Euro is falling against the USD.
Current Gold and Silver Rates as of July 6th
Gold (August 2012 delivery) is traded at $1,603.6 per t oz. a $5.8 or 0.36% decrease as of 07:43*.
Silver (August 2012 delivery) is at $27.625 per t oz – a $0.047 or 0.17% decrease as of 07:43*.
Daily Outlook for July 6th
Gold and silver zigzagged with an unclear trend throughout the week, but they may finish the week on a negative note. Since the U.S employment report didn’t show a big progress and was much lower than many had anticipated, this news is likely to drag down commodities rates. Since major commodities, U.S stocks and Euro/USD are strongly linked with precious metals, this could mean that all these markets will decline during the day.
Here is a reminder of the top events and publications that are scheduled for today (all times GMT):
08:00 – Swiss National Bank Forex Reserves
09:30 –Great BritainPPI Input
13:30 –Canada’s Employment Report
13:30 –U.S.Unemployment Rate & Non-Farm Payroll Report
For further reading: