Gold and silver prices started yesterday their road to recovery from September’s downfalls as they have registered sharp gains. That being said and currently, gold and silver prices are traded down. Today, the Reserve Bank of Australia will announce its Cash Rate Decision, and ECB President Trichet and Fed Chairman Bernanke will testify.
Here is a market outlook of precious metals prices for today, October 4th:
Gold and Silver Prices – October
Gold price sharply inclined on Monday by 2.18% to $1,657; silver price also increased by 2.37% to $30.80. The chart below shows the development of gold and silver prices during the past couple of weeks (normalized gold and silver prices (September 16th 2011=100)). The chart shows the moderate recovery of gold and silver prices in recent days.
The ratio between gold and silver prices slipped on Monday, October 3rd to 53.83. During September-October, silver price declined by a much higher rate than gold price as the ratio increased by 22.7%.
On Today’s Agenda:
ECB President Trichet speaks: before the ECB announcement of its rate decision on Thursday, the European Central Bank President Trichet will give a speech that might hint into ECB’s rate decision. Trichet will probably also refer to the recent decisions of European policymakers to increase the EFSF funds;
Bernanke Testifies: following the announcement of FOMC plan to purchase LT securities and to sell ST securities to conclude by June 2012, the Federal Reserve Chairman is likely to address the stability and progress of US economy; update: Bernanke hinted in his speech that the Fed might take further steps to jump0start the economy (more on the Fed chairman’s speech tomorrow).
US Dollar / Gold & Silver Prices – October
The EURO to US Dollar exchange rate started October with a very sharp decrease of 1.58% to reach 1.3176 on Monday; the Australian dollar and the Canadian dollar also depreciated against the US Dollar also by 1.40% and 0.42%, respectively. If major currencies will continue to depreciate against the US Dollar during the day, they may curb the recent rally of gold and silver prices.
U.S. Treasuries / Gold Price – October
The US 10-year Treasury yield sharp declined on Monday by 0.10 percent points to 1.80%- the lowest yield level since September 22nd; since September 27th the 10 year treasury yield has sharply fallen by 0.20 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 traders are coming back to the “safe haven” investments mainly in the past few days. If the U.S. long term securities’ yields will keep on falling, it might suggest gold price will rise.
S&P500 / Gold Price – October
The S&P500 index sharply fell on Monday by 2.83%; in the past five business days the S&P500 index sharply declined by 6.48%. The correlation between the S&P500 index and gold price was weaker in September than in previous months (during September it was -0.172) as gold price sharply fell during the second part of the month; if the market will continue to fall then gold price is likely to make a comeback: as the US stock markets will continue to fall, they might also pressure gold price to rise.
Current Gold and Silver Prices
The precious metals prices are currently traded down in the U.S. markets:
Current gold price short term future (November 2011 delivery) is traded at $1,622.9 per t oz. a $34.8 or 2.10% decrease as of 17:27*.
Current silver price short term future (November 2011 delivery) is at $29.75 per t oz – a 3.39% decline as of 17:29*.
The current ratio of gold to silver prices is at 54.55.
Gold and Silver Prices Outlook:
Gold and silver prices started October with rises, but currently they are traded down, following the Fed Chairman’s recent speech the speculation around the Fed’s next step might be among the factors to push down gold and silver prices. Furthermore, the European Central Bank President Jean-Claude Trichet might affect the trading today if he will report of any news or if Trichet will hint on the upcoming ECB rate decision. The ongoing decline in the US and European stock markets and the growing concerns of the development of the Greek debt into a Euro Area crisis continue to crowd out any other news items such the recent improvement in the U.S. PMI manufacturing; thus the current situation is likely to keep the market in high anxiety mode and consequently help gold and silver prices recover form their declines in September.
Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):
5:30 – Reserve Bank of Australia – Cash Rate Decision
14:00 – ECB conference Trichet speaks
15:00 – Bernanke Testifies
15:00 – U.S. ISM Non-Manufacturing PMI
15:30 – EIA Report on Crude Oil Stockpiles
For further reading:
Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.