Gold and Silver Prices Outlook for November 2011

Gold and silver prices made a comeback from the sharp falls they had recorded in September and rose during October. What were the main factors that contributed to the comeback of gold and silver prices in October? The uncertainty in the financial markets remained high revolving the progress of the U.S. Economy and the Greek debt crisis. This uncertainty may have been among the factors to push gold and silver prices up. So what is next for gold and silver prices in November 2011? Let’s examine the metals market for October and provide an outlook for gold and silver prices for November 2011. 

Gold and Silver Prices October 2011

Gold and silver prices started the month with moderate falls that shifted towards the second part of the month to very sharp rises. Gold price ended October with a 6.3% increase and silver price rose by 14.2%.

The table below divides the month into two parts with the breaking point at October 20th; during the first part of October, gold price slipped by 0.6%, while silver price slightly inclined by 0.7%. But during the second part of October, silver price sharply inclined by 13.5%, and gold price increased by 7.0%.

Gold price outlook and Silver price FORECAST us dollar euro percent change October November 2011

During the first part of October, the U.S dollar sharply appreciated against the Euro, Australian dollar and Canadian dollar, in which the two latter currencies are usually strongly correlated with gold and silver prices; during the second part of October, the US dollar depreciated against the Euro and Yen and only moderately appreciated against the Australian dollar and CAD; this shift is consistent with the sharp changes in gold and silver prices‘ movement.

 

 

The chart below shows the changes in gold and silver prices during October, in which the prices were normalized to 100 on September 30th 2011.

Gold prices forecast & silver price outlook 2011 October November 1

The next chart presents the changes in the ratio of gold price to silver price (gold price/silver price) during October; the ratio sharply fell during the month. The ratio sharply fell as gold price underperformed silver price. In the last week of October the ratio stabilized around the 49-50 mark.

Gold and Silver prices ratio 2011 November

Here are several factors that may have affected gold price and silver price to rise during October:

  1. The Greek debt crisis is still a real and near threat on the stability of the European economy; this crisis didn’t help ease the concerns of many investors;
  2. The weakening of U.S dollar compared with the riskier currencies including Euro, and Yen during October especially during the second half of the month;
  3. The sharp rises in the U.S. stock market indexes during the month(see below);
  4. The growth in the U.S. federal deficit during September 2011 by $64 billion raised the level of uncertainty in the market.
  5. Shifts in the sentiment of traders as traditional “safe haven” investments were traded down.

Here are several factors that may have affected gold and silver prices to decline during October:

  1. The U.S labor report for October that showed an increase in U.S. employment;
  2. The rapid rises in long term U.S Treasury bills yields during the month (see below);
  3. The strengthening of US dollar compared with the riskier currencies including Euro and Austrian Dollar, during the first part of October;

The sharp gains in gold and silver prices during October strengthened the relation between the two bullion prices as the correlation between the daily percent changes of gold and silver prices slightly inclined to 0.860 – the highest correlation level since March 2011.

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For further reading:

Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.