Gold and silver prices sharply fell yesterday after they had inclined on Friday. The recent news from the European debt crisis comes from Italy, as S&P downgraded Italy’s credit rating from +A to A. Furthermore, the IMF lowered global economic outlook. These news items might stir up the financial markets during the day. Today, the Euro and German ZEW economic sentiment will be published, the U.S. building permits and housing starts for August, and Japan’s trade balance report. Tomorrow the FOMC meeting will conclude and a statement will be released; the speculation around its next step and will it issue another stimulus plan occupied the news today.
Here is a market outlook of precious metals prices for today, September 20th:
Gold and silver prices –September
Gold and silver prices sharply declined yesterday: Gold price fell on Monday by 1.97% to $1,778; silver price also sharply declined by 4.09% to $39.16. During September, gold price declined by 2.9% and silver price fell by 6.2%. The chart shows the price changes of gold and silver throughout September (normalized gold and silver prices (August 31st 2011=100)).
The ratio between gold and silver prices reached on Monday, September 19th 45.42. During September, gold price has slightly outperformed silver price as the ratio rose by 3.6%.
Despite the moderate drop in gold and silver prices during September (UTD), their volatility is still high: the standard deviations of the daily prices of gold and silver in September resemble the standard deviations of gold and silver daily prices in August, when gold and silver prices sharply inclined by 12.3%, and 4.1%, respectively.
On Today’s Agenda:
Euro and German economic sentiment: The upcoming publication will refer to the ZEW indicator of economic sentiment for Germany and Euro zone for August 2011. During August the ZEW indicator for Germany declined by 22.5 points (see here the recent report);
U.S. Building Permits and Housing Starts: This report will provide an indicator of the progress of the housing market. In the recent report regarding July 2011, US building permits and housing starts rates declined. If the upcoming report regarding August will continue to be negative, it may further affect traders to trade up gold and silver;
Japanese Trade Balance Report: The Japanese trade balance deficit for July 2011 sharply decreased by 33.6% compared with June 2011, to reach a deficit of 130.500 billion YEN (nearly $1.69 billion). Japan is among the leading importing countries of commodities including gold.
S&P500 / Gold & silver Prices – September Update
The S&P500 index changed direction and slightly fell yesterday by 0.98%; during September the S&P500 index decreased by 1.21%. The negative correlation between the S&P500 index and gold and silver prices (as of September it was -0.557 and -0.119, respectively) suggest that the decline in gold and silver prices weren’t related directly to the decrease in the US stock markets. If the stock markets will start to pick up again, it might also affect gold and silver to trade down or at least curb their rises.
U.S. Treasuries / Gold Price – September Update
The US 10-year Treasury yields sharply fell 0.11 percent points to 1.97%; during September they have fallen by 0.26 percent points. Despite the negative correlation between the US long term Treasury yields and gold price daily percent changes (e.g. the linear correlation between 10 yr Treasury yield and gold price during September (up to date) was 0.434), gold price declined yesterday. This might suggest that if US long term Treasury yields will continue to drop, it may eventually also reflect in an increase in gold price.
US Dollar / Gold & Silver Prices – September Update
The Euro to USD slightly declined yesterday by 0.80% to 1.3685; during September the EURO/USD rate fell by 4.8%. If the USD will continue to appreciate against major currencies including Euro, AUD and CAD, it may also pressure gold and silver prices to trade down.
Current Gold and Silver prices
The precious metals prices are currently traded slightly up in the U.S. markets:
Current gold price short term future (October 2011 delivery) is traded at $1,794.4 per t oz. a $15.5 or 0.87% increase as of 14:56*.
Current silver price short term future is at $39.620 per t oz – a $0.457 or 1.17% incline as of 14:56*.
The current ratio of gold to silver prices is at 45.29.
Gold and silver prices Outlook:
Gold and silver prices changed direction and sharply fell yesterday, but currently they are already traded slightly up. The news of the downgrade of Italy’s credit rating won’t help stabilize the markets, and if the European economic sentiment and US housing starts reports will show negative figures, they might also further adversely affect the financial markets. If the US dollar won’t further appreciate against major currencies such as CAD, AUD and Euro, throughout the day, then there is likely to be another correction for gold and silver prices. For the remainder of the month I still speculate that gold and silver prices will slowly recover from their recent drop.
Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):
10:00 – Euro and German ZEW economic sentiment
13:30 – U.S. Building Permits
13:30 – U.S. Housing Starts
00:50 – Report of Japanese Trade balance
13:00 – Canadian Core CPI
15:00 – U.S. existing home sales
15:30 – EIA report about Crude oil inventories
19:15 – FOMC meeting
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