Gold and silver prices didn’t do much on the last day of September, with gold price slightly rising and silver price declining. Currently, gold and silver prices are traded sharply up. Today, the U.S. ISM Manufacturing PMI report will be published, and Australian Trade Balance report.
Here is a market outlook of precious metals prices for today, October 3rd:
Gold and Silver Prices – September/ October
Gold price slightly inclined on Friday by 0.31% to $1,622; silver price on the other hand decreased by 1.44% to $30.08. During September, gold price decreased by 11.4% and silver price plummeted by 28.0%. The chart below shows the development of gold and silver prices during September (normalized gold and silver prices (August 31st 2011=100)).
The ratio between gold and silver prices inclined on Friday, September 30th to 53.93. During September, silver price declined by a much higher rate than gold price as the ratio increased by 23%.
On Today’s Agenda:
U.S. ISM Manufacturing PMI: This report will show the monthly change in manufacturing sector on a national level during September 2011. In August the index slightly fell to 50.6%; this index might affect traders of major commodities (see here my review of last report);
Australian Trade Balance: The upcoming report will refer to August 2011. In the July 2011 report, there was a rise in export of non-monetary gold by $596 million (82%); if the gold exports will show an increase in August, it might suggest an increase in demand for non-monetary gold that could explain the changes in gold prices (see here last report);
US Dollar / Gold & Silver Prices –September/ October
The EURO/USD exchange rate closed the month with a very sharp drop of 1.54% to reach 1.3388 on Friday; the AUD/USD also sharply fell by 1.23%; the USD/CAD increased by 1.38%. These sharp changes in the EURO/USD may have been stem from the recent hike in Euro Area inflation rate for September (sere below). If major currencies will continue to devalue against the USD during the day, they may also pressure gold and silver prices to trade down.
U.S. Treasuries / Gold Price – September/ October
The US 10-year Treasury yield sharp fell on Friday by 0.07 percent points to 1.92%, much like the rest of the long term securities; during September the 10 year treasury yield has fallen by 0.13 percent points. The negative correlation between the US long term Treasury yields and gold price daily percent changes (in September the correlation was -0.232), might suggest that if traders will continue to purchase LT securities’ that will decrease their yields, it might suggest gold will also trade up so that gold price will increase.
S&P500 / Gold Price – September/ October
The S&P500 index sharply fell on Friday by 2.50%; during September the S&P500 index declined by 7.18%. The correlation between the S&P500 index and gold price was weaker in September than in previous months (during September it was -0.172) suggest that the US stock markets’ performance wasn’t strongly related to the movement in gold price during September. But if the US stock markets will continue to drop, they might moderately pressure gold price to trade up.
Euro Area Inflation – 3% in September
According to the recent report of the Eurostat the Euro Area annual inflation rate for September sharply inclined from an annual rate of 2.5% to 3% in September. This hike coincides with the increase in monetary development in August as the M1 inclined from 2.1% in July to 2.8% in August. These changes may have affected the Euro/USD exchange rate to trade down on Friday. This news also lowers the chances that the ECB will decrease the interest rate by 0.5% and the rate drop of 0.25% is also not certain.
Current Gold and Silver Prices
The precious metals prices are currently traded up in the European markets:
Current gold price short term future (November 2011 delivery) is traded at $1,655.5 per t oz. a $33.2 or 2.05% increase as of 09:00*.
Current silver price short term future (November 2011 delivery) is at $30.740 per t oz – a $0.657 or 2.18% incline as of 09:00*.
The current ratio of gold to silver prices is at 53.85.
Gold and Silver Prices Outlook:
Gold price closed the month of September moderately rising, while silver price declined. After one of the worst monthly performances for both gold and silver prices, things are likely to change in October. The relation between the two bullion prices is still robust so that if gold price will start to pick up throughout the day over the weak performance of the US stock market, and the drop in LT securities yields, silver price will probably follow and incline as well. The recent hike in Euro Area inflation for September will likely to keep the ECB interest rate at 1.5% or perhaps at 1.25%, if Trichet will lower the ECB rate by 0.25 percent points. If there will be an announcement of a rate drops on Thursday, it could affect not only the Euro/USD, but also pressure gold and silver prices down. Today’s US PMI manufacturing report might affect gold and silver prices, and if the ISM index will decline, it could contribute to the rally of gold and silver prices during the first trading day of October .
Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):
15:00 – U.S. ISM Manufacturing PMI
2:30 – Australian Trade Balance
5:30 – Reserve Bank of Australia – Cash Rate Decision
14:00 – ECB conference Trichet speaks
15:00 – Bernanke Testifies
For further reading:
Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.