Gold and silver prices took a sharp turn and sharply rose yesterday. Gold recorded the sharpest single day gain this year (UTD).
The Philly Fed Index tumbled down to -5.8 in May; this news may have rallied bullion prices but traded down U.S stock indexes and oil prices. This news along with the recent minutes of the FOMC meeting from April may have rekindled the speculation around QE3. The news of Moody’s downgrade of Spanish Banks doesn’t help the Euro.
On today’s agenda: GB 10 Year Bond Auction and Canada’s Core CPI. Currently precious metals are trading up.
Here is a short outlook for gold and silver prices for Friday, May 18th:
Precious Metals – May Update
Gold price spiked on Thursday by 2.49% to $1,574.6; silver also rose by 3.03% to $28.02. During the month gold declined by 5.37% and silver by 12.32%.
The chart below presents the normalized prices of metals during month so far (both metals rates are normalized to 100 as of April 30th).
The ratio between two precious metals changed direction and decrease yesterday to 56.21. During the month the ratio rose by 4.75% as silver has moderately under-performed gold during the month. In the chart below are the developments of this ratio during May.
In the recent May survey, the Philly Fed Manufacturing Index tumbled from +8.5 in April to -5.8 in May 2012. This shift is a negative signal for the developments in the U.S economy. Furthermore, along with the recent minutes of the FOMC meeting, the speculation around another quantitative easing was rekindled again.
U.S. Jobless Claims Remained Unchanged
According to the recent report the jobless claims remained unchanged at 370,000. This news doesn’t change much the current situation in the U.S and doesn’t look well for the progress of the U.S. jobless claims.
On Today’s Agenda
Canada’s Core CPI: According to the Canadian CPI report for March 2012, the core CPI excluding food and energy increased by 1.9% from March 2011 to March 2012. This report might affect the Canadian dollar, which is also strongly correlated with bullion prices;
GB 10 Year Bond Auction: the Great Britain government will also issue a bond auction; in the previous auction back from April 3rd the actual rate reached an interest rate of 2.22;
G8 Meeting: this meeting will be held over the weekend (Friday and Saturday); if the G8 countries will come up with big headlines from this meeting it may have some effects on the financial markets;
Forex / Gold & Silver Market – May Update
The Euro/U.S Dollar slipped again on Thursday by 0.14% to 1.2698 – the lowest level since January 13th 2012. During the month (UTD) the Euro/U.S Dollar fell by 4.09%; furthermore, the Aussie dollar and Canadian dollar also depreciated on Thursday by 0.26% and 0.73%, respectively. On the other hand the Yen sharply appreciated against the USD by 1.31%. The news of the Japanese GDP beating expectations may be responsible for this rally. Since these currencies pairs are still correlated with precious metals prices, if the U.S dollar will continues to appreciate, bullion prices may resume their descent. Currently the Euro is rising against the USD.
Current Gold and Silver Prices as of May 18th
Gold (June 2012 delivery) is traded at $1,586.5 per t oz. a $11.6 or 0.74% increase as of 09:52*.
Silver (June 2012 delivery) is at $28.28 per t oz – a $0.26 or 0.93% increase as of 09:51*.
Daily Outlook for May 18th
Gold and silver prices may have changed direction during yesterday’s trading, but for now the circumstances have changed much. In my opinion, the Philly Fed index doesn’t project well on the progress of the U.S economy, but this isn’t a clear cut evidence for a slowdown in the U.S that will translate to the Fed issuing another QE program in the near future. On the one hand if the U.S dollar will continue to appreciate then precious metals prices may resume their downward trend or at least curb their recent uprise. On the other hand this renewed speculation around the QE3 prospects may keep this rally going to close the week on a positive note for bullion.
Here is a reminder of the top events and reports that are planned for today (all times GMT):
Tentative – GB 10 Year Bond Auction
13:00 – Canada’s Core CPI
All Day – G8 Meeting
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