Gold and silver prices slightly fell on Friday after they have risen very precipitately during most of the week. There are several updates regarding the Greek debt crisis including the German vote, ECB lending policy and more. Bloomberg reports gold holdings in Exchange Traded Products increased for the fifth consecutive day to a record high. Currently gold and silver prices are rising (update: silver is up by over 4% while gold is only up by 0.69% as of 20:31 GMT; the sharp gain in silver couldn’t just be explained by the gains of gold , Euro and AUD – I will refer to this interesting occurrence in tomrrow’s analysis). Today, the U.S Core Durable Goods report will be published and the U.S. Consumer Confidence.
Here is a short analysis on gold and silver for Tuesday, February 28th:
Gold and Silver– February Update
Gold price slightly decreased on Monday by 0.08% to $1,774.9; silver on the other hand moderately increased by 0.52% to $35.60. During February, gold rose by 1.98% and silver by 7.04%.
The chart below presents the developments of gold and silver during the month (prices are normalized to January 31st).
The ratio between gold and silver slightly fell during Monday, February 27th and reached 49.85 – the lowest level since October 28th, 2011. During February the ratio declined by 4.73% as silver has slightly outperformed gold. In the chart below are the changes in this ratio during February.
Despite the different directions gold and silver took yesterday, the linear correlation of their daily percent changes is still strong and robust as indicated in the chart below.
European Debt Crisis Update
- ECB said it “has decided to temporarily suspend the eligibility of marketable debt instruments issued or fully guaranteed by the Hellenic Republic for use as collateral in Eurosystem monetary policy operations”. This announcement came soon after the rating agency Standard and Poor’s cut Greece’s credit rating to “selective default”. This news however doesn’t seem to take the financial community by surprise as the Euro only slightly declined yesterday.
- In Germany, Merkel won the preliminary vote to approve the Greek bailout package.
- ECB will lend tomorrow European banks another €470 billion as part of the second offering of unlimited three-year funds.
On Today’s Agenda
U.S Consumer Confidence: according to the recent report, the consumer confidence index slipped in January compared with December’s index. The current expectations are that this index might change direction and rally in the February index since the U.S. economy has shown some signs of progress; this report might affect commodities prices via the US dollar;
U.S Core Durable Goods: This report may indirectly represent the progress of the U.S. demand for commodities. According to a flash estimate for December 2011, manufactured durable goods sharply rose by $6.2 billion; Non-defense new orders for capital goods also rose by $4.6 billion;
Forex / Gold & Silver Market – February
The Euro/U.S Dollar slightly fell on Monday by 0.39% to 1.3397. During February Euro/U.S Dollar increased by 2.4%; on the other hand, the Aussie dollar appreciated against the U.S. dollar by 0.57%. Theses shifts in different directions for two currencies that are historically correlated with the changed of precious metals prices might explain the slow movement of gold and silver during yesterday’s trading. If the Euro and Aussie dollar will trade up during the day; it could indicate that gold and silver prices will follow and also increase. Currently, the Euro/USD is slightly rising.
Gold and Silver Daily Outlook
Gold and silver started off the week with little changes, after they have sharply rose during most of last week. In general, yesterday was a slow day not only for precious metals but also for other commodities such as crude oil, forex and stock markets. Today probably won’t be much different as there aren’t many events or headlines that could affect the bullion market. The upcoming reports to be published during the day including U.S Department of Commerce – Core Durable Goods and U.S Consumer Confidence report might affect the strength of the US dollar and consequently the direction of gold and silver prices.
Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):
13:30 – U.S Department of Commerce – Core Durable Goods
15:00 – U.S Consumer Confidence
10:30 – KOF Economic Barometer
10:00 – Euro Area Annual Inflation (February)
13:30 – Second U.S GDP 4Q 2011 Estimate
15:00 – Bernanke Testifies
15:30 – EIA Petroleum Stockpiles Report
2:00– China Manufacturing PMI
For further reading: