Gold and silver prices continued to dwindle yesterday: both metals prices slightly declined on the last day of the month. Earlier today the RBA announced it will cut its interest rate by 0.5 percent point to 3.75%. This rate reduction is larger than many had anticipated. The reason for this sharp cut is due to RBA’s concerns over the growth rate of Australia’s economy. This is the sharpest rate cut the Bank had done since February 2009. This news already affected the Aussie dollar which is currently traded down. This news might also affect bullion prices which are strongly correlated with the Australian dollar. China’s PMI manufacturing expanded in April to 53.3 which is a bit less than expected. This may have an adverse effect on commodities prices.
Currently bullion are falling. On today’s agenda: Great Britain and U.S Manufacturing PMI.
Here is a short analysis for precious metals for Tuesday, May 1st:
Precious Metals– May Update
Gold price slipped on Monday by 0.04% to $1,664.2; silver also decreased by 1.26% to $31.02. During the month gold decreased by 0.46% and silver by 4.52%.
The chart below shows the shifts in both precious metals prices during the month (rates are normalized to 100 as of March 30th).
The ratio between these precious metals rose to 53.66. During April the ratio increased by 4.25% as the yellow metal has outperformed silver during the month. In the chart below are the developments of this ratio during recent days.
U.S. ISM Manufacturing PMI: This report will refer to the monthly development in the manufacturing sector on a national level during April 2012. During March 2012 the index edged up to 53.4%, which means the manufacturing is growing at a slightly faster pace; this index might affect forex and bullion markets;
GB Manufacturing PMI: This report will refer to Great Britain’s changes in manufacturing sector during April 2012. In the previous report regarding March 2012 the index edged down to 52.1%. This rate means the manufacturing sector is still expanding but at a slightly slower pace; this index might affect GB Pound;
Forex / Precious Metals Market – May Update
The Euro/U.S Dollar slightly decreased on Monday by 0.11% to 1.3239. During April Euro/U.S Dollardecreased by 0.79%; furthermore, the “risk currencies” including the Australian dollar also depreciated on Monday against the U.S. dollar by 0.4%. The recent news of RBA’s rate reduction will likely to depreciate the Australian dollar, which is strongly and positively correlated with metals prices (see chart below for the moving correlation between gold price and AUD/USD in the past several months) . This direction of the U.S dollar against the Euro and Aussie dollar, may affect gold and silver .
Current Bullion Rate as of May 1st
Gold (June 2012 delivery) is traded at $1,660.6 per t oz. a $3.6 or 0.22% decrease as of 11:15*.
Silver (June 2012 delivery) is at $30.835 per t oz – a $0.181 or 0.58% decrease as of 11:15*.
Daily Outlook and Analysis for May 1st
Gold and silver slightly declined on Monday and may continue to trade down today. The recent RBA rate cut is likely to affect the Aussie dollar which is linked with bullion prices. Finally, the upcoming U.S report on the manufacturing PMI may also affect the precious metals prices via the shifts in the U.S dollar.
Here is a reminder of the top events and reports that are planned for today and tomorrow (all times GMT):
04:30 – Reserve Bank of Australia – Cash Rate Statement
09:30 – GB Manufacturing PMI
15:00 – U.S. ISM Manufacturing PMI
10:00 – Euro Area Unemployment Rate
13:15 – ADP estimate of U.S. non-farm payroll
15:00 – U.S Factory Orders
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