Following the U.S Independence Day holiday there are many publications and reports that will come out today that could affect the bullion markets. As expected, ECB announced it will cut its interest rate for July by 0.25 percent point to 0.75% – its lowest rate. This news is currently pulling down the Euro and precious metals along with it. Some speculate the ECB could lower the interest rate by 0.25%. Other items on today’s agenda: Spanish 10 Year Bond Auction, Great Britain Bank Rate & Asset Purchase Plan, ADP estimate of U.S. non-farm payroll, U.S. Jobless Claims (update: Jobless claims down to 374k), and U.S. ISM Non-Manufacturing PMI.
Here is a short outlook for gold and silver for Thursday, July 5th:
Precious Metals – July Update
Gold price increased on Tuesday by 1.51% to $1,621.8; silver also rose by 2.84% to $28.28. During July, gold rose by 1.1% and silver by 2.42%.
The chart below shows the normalized rates of these precious metals during the past few weeks (normalized to 100 as of June 20th).
Australian Trade Balance for May – Gold Exports Rose
Yesterday, the Australian trade balance was updated and showed the seasonally adjusted deficit expanded in May to $285; non-monetary gold exports rose $185m (15%). This news may signal there is a rise in demand for gold in Asia.
On Today’s Agenda
ECB Press Conference and Euro Rate Decision: ECB announced it will cut the rate by 0.25 pp to 0.75%; it also reduced the deposits rates from 0.25 to zero. In previous interest rate decision Mario Draghi left the EU interest rate flat at 1%; this news is likely to pull down the Euro/USD exchange rate that is strongly linked with bullion rates;
ADP estimate of U.S. non-farm payroll: ADP will publish its estimate for the upcoming U.S non-farm payroll change during June 2012 in anticipation for the upcoming no-farm report to be published by Friday;
U.S. Jobless Claims Weekly Report: in the latest report the jobless claims edged down by 6k to 386,000; this upcoming weekly report may affect the U.S dollar and consequently commodities rates;
U.S. ISM Non-Manufacturing PMI: During May 2012 this index edged up to 53.7% – this still means the non-manufacturing is expanding and at a slightly faster pace than before; this index may affect forex and commodities trading;
Spanish 10 Year Bond Auction: the Spanish government will issue another bond auction; following the recent EU Summit this auction sales is likely to go well; in the previous bond auction, which was held at the beginning of June, the rate reached 6.04%;
Great Britain Bank Rate: as of June the BOE’s rate remained unchanged at 0.5% and the asset purchase plan of £325 billion continues;
American Stock Markets / Gold & Silver– July
The S&P500 index rose on Tuesday by 0.62% to 1,374.02. During the month S&P500 index traded up by 0.87%. The linear correlation between S&P500 and gold rate has started to pick up and rise. During the last month the linear correlation was 0.54 which is strong and robust. The relation between silver and SNP500 is very similar. These relations however aren’t constant and vary over time as indicated in the chart below. Nonetheless if these strong and positive relations will hold up they could suggest that if S&P500 will continue to rally, then gold and silver are likely to follow.
The Euro/US Dollar slightly declined on Wednesday by 0.63% to 1.2528. During the month (UTD) the Euro/U.S Dollar decreased by 1.1%. Further, other exchange rates including the Aussie dollar also depreciated on Wednesday against the USD by 0.06%. There is still a very high linear correlation between Euro/USD and gold as indicated in the chart below. If the Euro/USD will continue to trade down, it could adversely affect bullion rates. Currently the Euro is edging down against the USD.
Current Gold and Silver Rates as of July 5th
Gold (August 2012 delivery) is traded at $1,615.6 per t oz. a $6.2 or 0.38% decrease as of 06:22*.
Silver (August 2012 delivery) is at $28.09 per t oz – a $0.19 or 0.67% decrease as of 06:21*.
Daily Outlook for July 5th
Gold and silver started off the week trading down but coming Tuesday they both rallied along with the rest of the market including other commodities rates. Since the U.S markets were the closed yesterday there was little movement in the commodities markets. If ECB will lower the interest rate, this decision could adversary affect not only the Euro/USD, but also bullion rates. The U.S reports including jobless claims and ISM Non-Manufacturing PMI might also affect commodities and forex markets. If these reports won’t be positive they may positively affect precious metals prices.
Here is a reminder of the top events and publications that are scheduled for today and tomorrow (all times GMT):
Tentative – Spanish 10 Year Bond Auction
12:00 –Great BritainBank Rate & Asset Purchase Plan
12:45 – ECB Press Conference and Euro Rate Decision
13:15 – ADP estimate ofU.S.non-farm payroll
13:30 –U.S.Jobless Claims Weekly Report
15:00 –U.S.ISM Non-Manufacturing PMI
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
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