Gold and silver prices started the week with moderate falls as speculation over the next step of the European leaders is not clear. The Chinese economy grew in the third quarter by a slower than expected pace. Currently gold and silver prices are traded down. Today, U.S. Producer Price Index will be published, the U.S. TIC Long Term Purchases report and the Chairman of the Fed will give a speech.
Here is a market outlook of precious metals prices for today, October 18th:
Gold and Silver Prices – October Update
Gold price slightly declined on Monday by 0.38% to $1,676.6; silver price also decreased by 1.09% to $31.87. The chart below shows the development of gold and silver prices in October (normalized gold and silver prices (September 30th 2011=100)). During the month, gold price inclined by 3.3%, and silver prices by 5.8%.
The ratio between gold and silver prices increased on Monday, October 17th to 52.69. During October, silver price inclined by a slightly larger rate than gold price as the ratio decreased by 2.3%.
Update on European Debt Crisis
Following the G-20 meeting over the weekend, as it was agreed that the European leaders will need to reach an agreement on a plan to ward off the current European debt crisis by next Monday was met with some resistance: there are speculations that Germany won’t resolve the current crisis until Monday, according to sources close the Merkel;
As the same issue, there are speculations that if the EFTS fund will be augmented to €2 trillion this could also adversely affect France’s credit rating (AAA) as this move will increase its liability. This recent information/speculation may have been among the factors that curbed the recent gains in the stock and commodities markets.
China’s GDP Growth Rate Slipped in Q3 2011
The GDP of China increased in the third quarter by 2.3% (Q-2-Q), or in annual terms by 9.1%. This is a drop in the growth rate from the previous quarter as the GDP grew by 9.7% and 9.5% in the first and second quarters (in annul terms), respectively. This news may have been among the factors that contributed to yesterday’s falls in the commodities and stock markets.
On Today’s Agenda:
U.S. Producer Price Index: This report will show the progress in the PPI during September. In the previous report regarding August, this index for finished goods remained flat, after an increase in 0.2% in July; this news could have an effect on gold and silver prices;
U.S. TIC Long Term Purchases: The Treasury International Capital report will present the main changes in the purchases and sales of US long term treasuries in August 2011. In the previous report regarding July 2011, the net foreign holdings in US Treasuries longer-term notes rose by $9.5 billion (see here my last review of July 2011).
Bernanke Speaks: following last month’s announcement of FOMC plan to purchase LT securities and to sell ST securities to conclude by June 2012, the Chairman of the Federal Reserve is likely to address the economic outlook of the FOMC and his speech may affect forex and commodities traders if he will hint of another stimulus plan in the horizon for the FOMC;
U.S Dollar / Gold & Silver Prices – October
The Euro to U.S Dollar exchange rate declined on Monday by 1.04% to reach 1.3737; other currencies also fell against the USD including the Canadian dollar and AUD. If the “risk currencies” (AUD and CAD) will keep on falling today, they could also curb the progress of gold and silver prices during the day.
S&P500 / Gold Price – October
The S&P500 index also declined on Monday by 1.94% to reach 1,200.86; during October the S&P500 index increased by 6.14%. The correlation between the U.S. stock market and gold price nearly eliminated after they had a negative correlation in previous months, but in recent weeks, they seem to move in similar directions.
U.S. Treasuries / Gold Price – October
The U.S. 10-year Treasury yield changed direction and fell on Monday by 0.08 percent points to 2.18%; during October the 10 year treasury yield rose by 0.26 percent point. This change coincides with the recent drop in U.S stock markets and gold price.
Current Gold and Silver Prices
The precious metals prices are currently traded down in the European markets:
Current gold price short term future (November 2011 delivery) is traded at $1,657.60 per t oz. a $19 or 1.13% decrease as of 10:16*.
Current silver price short term future (November 2011 delivery) is at $30.945 per t oz – a $0.876 or 2.75% decline as of 10:16*.
The current ratio of gold to silver prices is at 53.57.
Gold and Silver Prices Outlook:
Gold and silver prices continue their fall they have started yesterday, despite the upward trend these metals have had during most of October. The recent news from China and the rumors from Europe may have contributed to the recent drop in commodities prices. The speculation over the next steps of Euro leaders will continue to stir up the markets and may push gold and silver prices in different directions throughout the week with no clear trend.
Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):
13:30 – U.S. Producer Price Index
14:00 – U.S. TIC Long Term Purchases
18:15 – Bernanke Speaks
13:30 – Report of U.S CPI
13:30 – U.S. Building Permits
13:30 – U.S. Housing Starts
15:30 – EIA Report on Crude Oil Stockpiles
For further reading:
- Weekly Outlook for October 17-21
- Gold and Silver Prices Monthly Outlook for October 2011
- Gold & Silver Prices | Weekly Recap 10-14 October
Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.