The House of Representatives votes yesterday to raise the US’s debt ceiling; this news pushed US dollar up very swiftly while gold and silver prices were traded down; currently, however gold and silver prices are traded up. Today, the U.S. Personal Spending report will be published along with Australian trade balance and Australian retail sales.
Let’s examine the precious metals market for today, August 2nd:
Gold and silver prices –August
Silver price also declined by 1.99% to $39.31.
During July, gold price increased by 8.5%, and silver price inclined by 15.1%.
The chart below shows the normalized gold and silver prices (July 12th 2011=100). As seen below, during the past three weeks silver price has substantially outperformed gold price.
The gold to silver ratio: the ratio between gold and silver prices started August on a rise as in inclined on August 1st by 1.4% to 41.26. During July silver price has outperformed gold price as the ratio fell by 5.7%.
US debt ceiling
The House of Representatives voted to raise the US debt ceiling by $2.1 trillion. The financial markets reacted very promptly as the US dollar appreciated against major currencies (see below) and gold and silver prices traded down. But this effect will likely to end very soon as the US economy is still not performing well and its debt will continue to rise.
US Dollar / Gold & silver prices – August update
The Euro to US dollar exchange rate declined yesterday by 1.03%; the US dollar also appreciated against other currencies including the YEN, AUD and CAD. This trend might be stem, in part, from the news of US averting catastrophe and managed to raise debt ceiling in the ninth hour. Gold and silver prices might have been affected from this news as they started August falling. But this news is likely to have short term effect on gold and silver prices because the troubles US economy is at continues including the disappointing US GDP growth Q2 2011 report or PMI Manufacturing report.
Australian Trade balance
In the previous report regarding May 2011, the seasonally adjusted balance of goods and services inclined by 716 million from a surplus of $1,617 million April 2011 to $2,333 million in May. There was a rise in export of non-monetary gold by 536 million; if this upward trend in gold export will continue, it might suggest an increase in demand for non-monetary gold that could explain part of the rise in gold prices during July, and might even bring new wind to gold price to rally again.
Current Gold and Silver prices
The precious metals prices are currently traded down in the European market:
The current gold price short term future (September 2011 delivery) is traded at $1,627.2 per t oz. a $5.5 or 0.34% increase as of 10:25*.
Current silver price, short term futures is at $39.515 per t oz – a $0.206 or 0.52%, incline as of 10:24*.
The current ratio of gold to silver prices is at 41.17.
Gold and silver prices Outlook:
Gold and silver prices started off August with falls, probably due, in part, to the news from US of raising the debt ceiling by $2.1 right before US would have defaulted on its debt; now that this uncertainty has subsided, the US’s economic slowdown will continue to occupy the news (upcoming labor report on Friday); this might translate into an increase in demand for gold and silver in the near future and consequently push gold and silver prices up again.
Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):
13:30 – US Personal Spending
2:30 – Australian trade of Balance
2:30 – Australian Retail Sales
15.00 – U.S. ISM Non-Manufacturing PMI
15:30 – EIA report about Crude oil inventories
For further reading:
Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.