Gold and silver prices continue to seek direction and ended yesterday moderately rising. The continuous rally the U.S. and Europe stock markets were probably driven from the recent bailout plans in the European markets that may have curbed the gains of gold and silver. Currently, gold and silver prices are traded up. Today, the European Central Bank interest rate decision will be announced, BOJ rate decision and U.S. Unemployment Claims report will be published. Here is a market outlook of precious metals prices for today, October 6th:
Gold and Silver Prices – October
Gold price inclined on Wednesday by 0.75% to $1,628; silver price also increased by 0.87% to $30.10. The chart below shows the development of gold and silver prices in recent weeks (normalized gold and silver prices (September 16th 2011=100)). During October gold price slightly inclined by 0.4%, and silver prices by 0.1%.
The ratio between gold and silver prices slipped on Wednesday, October 5th to 54.09. During October, silver price slightly declined by a larger rate than gold price as the ratio increased by 0.3%.
On Today’s Agenda:
ECB Rate Decision: This rate decision will be the last one for Jean Claude Trichet as President of the European Central Bank. Last month, ECB kept the interest rate unchanged at 1.5%. The recent Euro Area inflation rate sharply inclined to 3% (annual terms) in September; this news lowered the expectations of the financial community that the ECB cutting its rate by 0.5 percent point, and many anticipate a rate cut of 0.25 percent points. If ECB will lower interest rates it is likely to lower the Euros to US dollar exchange rate;
U.S. Unemployment Claims: For the week ending on September 23rd, initial claims declined by 37,000 to 391,000 claims; for the week ending on September 17th, the number of insured unemployment was 3.749 million, a decrease of 20,000 compared with the previous week’s (see here my recent review on the US Labor market);
BOJ Rate Decision: The BOJ kept the interest rate at 0 to 0.1 percent for a long time and is likely to continue doing so.
Europe’s Debt Crisis Update October 6th
The recent speculation comes from the IMF: it’s stated that the International Monetary Fund might purchase Spanish and Italian government bonds alongside the Euro Zone Bailout Fund to help ease the concerns in the markets.
EU financial ministers are seeking to safeguard European banks from the Greek debt exposure after the EU ministers issued a bailout to the French-Belgium Bank Dexia.
This news may have been among the factors to pull up the stock markets in the past few days and may push gold and silver prices down.
US Dollar / Gold & Silver Prices – October
The AUD to US Dollar exchange rate increase on Wednesday by 0.91% to reach 0.9659; the Canadian dollar also followed and appreciated against the US Dollar by 1.06%. Today, the EURO/USD is likely to be in the center of attention as the ECB will announce its rate decision for October. But if major risky currencies will continue to appreciate against the US Dollar during the day, as they did in recent days, they may help the rally of gold and silver prices.
S&P500 / Gold Price – October
The S&P500 index inclined again on Wednesday by 1.79%; during October the S&P500 index slightly increased by 1.11%. If the stock market will continue to rise today then it may curb the rally of gold and silver prices.
U.S. Treasuries / Gold Price – October
The US 10-year Treasury yield sharply inclined on Wednesday by 0.11 percent points to 1.92%; during October the 10 year treasury yield remained unchanged. This shift coincides with the gains in the U.S. stock markets over the new optimism in the markets over the European debt crisis. If the U.S. long term securities’ yields will keep on rising as they did yesterday, it might suggest gold price will decline.
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 $1,652.8 per t oz. a $11.2 or 0.68% increase as of 09:58*.
Current silver price short term future (November 2011 delivery) is at $31.205 per t oz – a $0.853 or 2.81% incline as of 09:59*.
The current ratio of gold to silver prices is at 52.96.
Gold and Silver Prices Outlook:
Gold and silver prices moderately inclined yesterday, but they didn’t change much in October. The upcoming ECB rate decision might stir up the financial markets especially if the ECB will make an unexpected decision (e.g. a 0.5% decrease, which is less likely). The light optimism in the markets over the recent actions taken by EU policymakers to contain the debt crisis in Europe, and the speculation around the Fed’s future steps to jump-start the U.S. economy will probably continue the positive sentiment in the financial markets. This sentiment might keep the rally of U.S. and European stock markets in the very short term and thus may curb the rally of gold and silver prices. But as long as the uncertainty in the markets is still high, gold and silver will thrive; so that it’s likely that gold and silver prices will continue their climb throughout October.
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Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):
13:30 – ECB conference Trichet Speaks and Euro Rate Decision
Tentative –Bank of Japan – Rate Decision
13:30 –U.S. Unemployment Claims
15:30 – EIA report on U.S. Natural Gas Market
12:00 – Canada Unemployment Rate and Employment Report
13.30 – U.S. Unemployment Rate & Non-farm Employment Report
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Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.