Gold and silver prices zigzagged again as they sharply declined yesterday and thus erasing the gains they had recorded on Monday. The gains the U.S. stock markets over the recent speech of Bernanke and the new hope of finalized bailout plan for struggling European banks may have helped push gold and silver prices down. Currently, gold and silver price is traded up. Today, the U.S. ISM Non-Manufacturing PMI will be published today.
Here is a market outlook of precious metals prices for today, October 5th:
Gold and Silver Prices – October
Gold price sharply declined on Tuesday by 2.52% to $1,616; silver price also sharply decreased by 3.10% to $29.84. The chart below shows the recent changes in gold and silver prices during the past couple of weeks (normalized gold and silver prices (September 16th 2011=100)).
The ratio between gold and silver prices inclined on Tuesday, October 4th to 53.93. During October, silver price slightly declined by a larger rate than gold price as the ratio increased by 0.4%.
On Today’s Agenda:
U.S. ISM Non-Manufacturing PMI: This monthly report will present the changes of non-manufacturing sector in September 2011. During August this index continued to grow with 53.3%, and it was slightly higher than in July as it reached 57.7%; this index might affect forex and commodities markets (see here last report).
The Chairman of the Federal Reserve – Ben Bernanke testified yesterday before Joint Economic Committee, U.S. Congress. In his testimony, he hinted that the FOMC will consider intervening in the U.S. market and taking additional steps to help the U.S. economy pull out of the recent rescission.
“The Committee will continue to closely monitor economic developments and is prepared to take further action as appropriate to promote a stronger economic recovery in a context of price stability.”
This speech may have affected the market yesterday as the U.S. stock markets inclined and gold and silver prices fell.
Europe’s Debt Crisis Update
EU financial ministers agreed last night to safeguard their banks. This agreement sparked new hopes that EU policymakers will allow the EFSF to lend funds to struggling banks. This news along with the news from Greece has enough funds to keep working until mid-November may have been among the factors to pull the markets up and push gold and silver prices down.
Italy’s Credit Rating Downgraded: Following the decision of S&P to downgrade Italy’s credit rating, now it was Moody’s turn, as the rating agency downgraded Italy’s credit rating by three levels from A2 to Aa2 with a negative outlook. This decision may curb the recent rally of the Euro/USD.
US Dollar / Gold & Silver Prices – October
The EURO to US Dollar exchange rate shifted from red to green and increase on Tuesday by 1.31% to reach 1.3348; the Australian dollar and the Canadian dollar also followed and appreciated against the US Dollar also by 0.47% and 0.37%, respectively. If major risky currencies will appreciate against the US Dollar during the day, as they did yesterday, they may help the rally of gold and silver prices.
S&P500 / Gold Price – October
The S&P500 index bounced back and sharply inclined on Tuesday by 2.25%; during October the S&P500 index slightly slipped by 0.66%. The correlation between the S&P500 index and gold price was weaker in September than in previous months, but if the stock market will continue to zigzag and incline today then gold price might be affected from this shift in the stock market.
U.S. Treasuries / Gold Price – October
The US 10-year Treasury yield slightly inclined on Tuesday by 0.02 percent points to 1.81%; during October the 10 year treasury yield has dropped by 0.11 percent points. This shift coincides with the gains in the stock markets and the falls in the bullion markets: The negative correlation between the U.S. long term Treasury yields and gold price daily percent changes might suggest that traders continue to zigzag between the stock markets and the “safe haven” investments including gold and U.S. long term Treasuries. If the U.S. long term securities’ yields will keep on falling as they did in recent days, it might suggest gold price will keep on rising.
Current Gold and Silver Prices
The precious metals prices are currently traded upin the U.S. markets:
Current gold price short term future (November 2011 delivery) is traded at $1,641.2 per t oz. a $25.2 or 1.56% increase as of 19:03*.
Current silver price short term future (November 2011 delivery) is at $30.325 per t oz – a $0.486 or 1.63% incline as of 19:03*.
The current ratio of gold to silver prices is at 54.11.
Gold and Silver Prices Outlook:
Gold and silver prices shifted from rises to falls and keep demonstrating high volatility as they did in September. The recent testimony of the Fed chairman Bernanke, and the speculation around the next step of the European policymakers in regards to the debt crisis may have helped the Euro, AUD and the U.S. stock markets to rise yesterday and consequently may have also affected traders to shift away from LT securities and gold. That being said, I still think that gold and silver prices are likely to continue their slow recovery from their falls during September.
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 Non-Manufacturing PMI
15:30 – EIA Report on Crude Oil Stockpiles
13:30 – ECB conference Trichet Speaks and Euro Rate Decision
Bank of Japan – Rate Decision
13:30 – Department of Labor Report – U.S. Unemployment Claims
15:30 – EIA report on U.S. Natural Gas Market
For further reading:
Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.