Gold and silver prices changed direction again and declined on Tuesday after they had risen on Monday. The recent news of China’s decline in trade growth during June (as both imports and exports growth fell in June compared with May’s figures) may have contributed to the downfall in bullion rates. The fall was also registered in other markets including oil and U.S stocks. The EU ministers didn’t make much progress in the recent Euro council meeting. Fitch stated it’s unlikely to U.S’s AAA rating will change before late 2013. The Rating agency is waiting for the debt reduction plan that will be implemented after the elections. Currently gold and silver are falling. There are many items on today’s agenda including: Minutes of FOMC Meeting (update: the minutes didn’t present any hints of another QE program; further several members also voiced their concerns over the effects the stimulus plans will have on the long term inflation pressures), American and Canadian Trade Balance reports, German and American 10 Year Bond Auctions, Bank of Japan Monetary Policy Statement, and Australia Rate of Unemployment.
Here is a short outlook for precious metals for Wednesday, July 11th:
Precious Metals – July Update
Gold fell on Tuesday by 0.59% to $1,579.8; silver also decreased by 2.05% to $26.88. During July, gold declined by 1.52% and silver by 2.64%.
The chart below presents the normalized rates of these precious metals during July (normalized to 100 as of June 29th).
The ratio between the two precious metals declined on Tuesday to 58.77. During July the ratio edged up by 1.153% as silver has slightly under-performed gold rate.
On Today’s Agenda
Minutes of June’s FOMC Meeting: Following the FOMC meeting from back in June gold and silver prices tumbled down. The minutes of the FOMC meeting might offer some perspective behind the recent FOMC decision and its future steps especially in anticipation for the upcoming FOMC meeting at the end of July;
U.S 10 Year Bond Auction: the U.S government will issue another bond auction; in the previous bond auction, which was held at the second week of June, the average rate was 1.62%;
American Trade Balance: This monthly report for May 2012 will present the changes in imports and exports of goods and services to and from the U.S; according to the previous American trade balance report regarding April the goods and services deficit decreased during the month to $50.1 billion.
Canadian Trade Balance: In the previous report regarding April 2012, exports decreased by 1.2%, and imports edged up by 0.1%; as a result, the trade balance fell from a $152 million surplus to $367 million deficit; this report may affect the Canadian dollar which tends to be strongly correlated with price of gold and crude oil;
German 10 Year Bond Auction: the German government will issue another bond auction; in the latent bond auction, which was held at the middle of June, the rate reached 1.52%;
Australia Rate of Unemployment: in May 2012 the number of employed rose by 38,900 people; the number of unemployed increased by 22,400 compared with April‘s numbers. If this trend ill continue to could affect the Australian dollar (see here the recent report);
Bank of Japan –Monetary Policy Statement: If the BOJ will introduce a new monetary stimulus plan, it might affect the Yen, other exchange rates and commodities prices;
Currencies / Gold & Silver Market – July Update
The Euro/US Dollar fell on Tuesday by 0.51% to 1.225. During the month (UTD) the Euro/USD declined by 3.3%. Further, other exchange rates such as the Australian dollar and CAD also depreciated on Tuesday against the USD by 0.17% and 0.32%, respectively. There is still a very strong relation among Euro/USD gold and silver. The linear correlation between gold and Euro/USD is 0.62 (daily percent changes, for June/July). If the Euro/USD will trade down, it could drag down precious metals rates.
Current Gold and Silver Rates as of July 11th
Gold (August 2012 delivery) is traded at $1,568.6 per t oz. a $11.2 or 0.71% decrease as of 23:25*.
Silver (August 2012 delivery) is at $26.82 per t oz – a $0.062 or 0.23% decrease as of 23:23*.
Daily Outlook for July 11th
Gold and silver may have started off the week rising but the following day they have both declined.
The news of China’s decline in trade growth during last month may have contributed to the decrease in gold and silver rates. Today there are many news items on the agenda that could affect not only commodities but also precious metals. The main reports include the FOMC meeting minutes and American trade balance. The FOMC meeting could positively affect precious metals if the minutes will reveal a possibility of another QE program in the near future. I think the FOMC won’t introduce QE3 in the near future. The U.S bond auction might also signal about the market sentiment. The Canadian trade balance might affect the Canadian dollar, which tends to be strongly linked with bullion rates.
Finally, if the Euro and other risk currencies will continue to decline, then they are likely to also pull down bullion prices.
Here is a reminder of the top events and publications that are scheduled for today and tomorrow (all times GMT):
13:30 –Canadian Trade Balance
13:30 –American Trade Balance
Tentative – German 10 Year Bond Auction
18:00 – U.S 10 Year Bond Auction
19:00 – Minutes of FOMC Meeting
2:30 – Australia Rate of Unemployment
Tentative – Bank of Japan –Monetary Policy Statement
9:00 – ECB Monthly Bulletin
13:30 – U.S. Jobless Claims Weekly Report
Tentative – Great Britain 10 Year Bond Auction
18:00 – ECB President Draghi Speaks
03:00 –China Second Quarter GDP 2012
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