Gold and silver declined for the second consecutive day after the FOMC didn’t announce any additional monetary expansion plans. As I have pointed out, without another QE program, gold and silver will likely to remain flat. The U.S manufacturing PMI edged up to 49.8 but is still showing contraction. According to ADP, U.S non-farm payroll rose by 163k in July. If tomorrow’s non-farm payroll report will show similar results it could boost the stocks and commodities markets. There are reports that Korea’s central bank raised again its gold reserve. Currently gold and silver are falling. On today’s agenda: Great Britain Bank Rate decision, ECB Euro Rate Decision, U.S. Jobless Claims, and U.S Factory Orders.
Here is a short outlook for precious metals for Thursday, August 2nd:
Precious Metals –August Update
Gold declined on Wednesday by 0.45% to $1,607.3; Silver also decreased by 1.36% to $27.54. During the week, gold fell by 0.95 %; silver edged up by 0.13%.
As seen, the chart shows the normalized prices of precious metals in recent weeks (normalized to 100 as of July 16th). As you can see, during the last few weeks gold and silver didn’t present a clear trend.
The ratio between the two precious metals rose on Wednesday to 58.37. During the week the ratio edged down by 1.08% as gold slightly under-performed silver.
FOMC Left Policy Unchanged
As many had expected the FOMC left its policy unchanged. The recent testimonies of Bernanke at the Hill and the minutes of last month’s FOMC meeting, have all pointed out that this the Fed won’t make any big announcements in this statement. This news didn’t help bullion rates and could continue to adversely affect precious metals rates in the days to come.
Below is a table of the changes in bullion rates during the day of release of the statement and the following day.
On Today’s Agenda
Great Britain Bank Rate Decision: as of July the BOE’s rate remained flat at 0.5% but raised the asset purchase plan by £50 billion to £375 billion;
ECB Press Rate Decision: In previous interest rate decision the President of ECB, Mario Draghi reduced the EU interest rate by 0.25pp to 0.75%; the recent deprecation of the Euro may affect the upcoming ECB rate decision; if ECB will change again the rate, it may affect the Euro and consequently bullion rates;
U.S. Jobless Claims: in the latest update the jobless claims fell by 35k to 353,000; this upcoming weekly report may affect the U.S dollar and consequently commodities prices;
U.S Factory Orders: this report will offer some insight to the growth of the U.S economy and could affect the direction of the U.S dollar;
Currencies / Gold & Silver Market – July/August Update
The Euro/US Dollar changed direction again on Wednesday and fell by 0.64% to 1.2225. During the week (UTD) the Euro/USD decreased by 0.8%. Further, other currencies including AUD and CAD also depreciated on Wednesday against the USD by 0.21% and 0.22%, respectively. The correlations between gold and the above-mentioned rates remain strong: during the month, the correlation between the gold and EURO/USD reached 0.7 (daily percent changes); the correlation between gold and AUD /USD, 0.61. Thus, if the Euro and AUD will continue to declined, they may pull down precious metals rates. Currently, the Euro/USD is rising.
Current Gold and Silver Rates as of August 2nd
Gold (September 2012 delivery) is traded at $1,603.9 per t oz. a $3.4 or 0.21% decrease as of 24:02*.
Silver (September 2012 delivery) is at $27.39 per t oz – a $0.145 or 0.53% decrease as of 24:02*.
Daily Outlook for August 2nd
Gold and silver declined for the second straight day and may continue on that direction during the day. This could be because the FOMC didn’t make an announcement of another stimulus plan. The upcoming rate decisions of MPC and ECB could affect the forex markets if there will be a significant announcement.
Finally, the upcoming American reports including jobless claims and factory orders could affect not only the forex markets but also bullion rates. If the Euro and other “risk currencies” will resume their downward trend, this could also drag down precious metals rates.
Here is a reminder of the top events and publications that are scheduled for today and tomorrow (all times GMT):
12:00 – Great Britain Bank Rate & Asset Purchase Plan
12:45 – ECB Press Conference and Euro Rate Decision
13:30 – U.S. Jobless Claims Weekly Report
15:00 – U.S Factory Orders
15:30 – EIA U.S. Natural Gas Storage Update
13:30 – U.S. Non-Farm Payroll Report
15:00 – U.S. ISM Non-Manufacturing PMI
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