Gold and silver prices took a real hit to the chin yesterday as they have plummeted to their monthly low. On the other hand most of major commodities have also suffered sharp falls yesterday. It’s hard to attribute all of yesterday’s falls in commodities prices to the recent FOMC decision, but this decision may have triggered this avalanche in the Forex, commodities, US Treasuries and US stock markets. Currently gold and silver price continue their free-fall. What is next for gold and silver price for the rest of September? The recent annoumcent by CME to raise margins requirements on gold and silver contracts may fuel the decline in gold and silver prices.
Today, an ECB press conference will be held in which Trichet will speak; the World Bank and IMF will hold a meeting over the weekend to talk about the global economic condition.
Here is a market outlook of precious metals prices for today, September 23rd:
Gold and Silver Prices –September
Gold and silver prices sharply fell yesterday: Gold price sharply declined on Thursday by 3.67% to $1,741; silver price plummeted by 9.61% to $36.58. During September, gold price declined by 4.9% and silver price fell by 12.4%. The chart below presents 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 sharply inclined on Thursday, September 22nd 47.62 – the highest ratio since January 31st, 2011. During September, gold price has outperformed silver price as the ratio rose by 8.6%.
On Today’s Agenda:
ECB conference Trichet speaks: following the recent announcement of the ECB along with other central banks, Trichet will give a speech regarding the economic stability of the Euro Area and the debt crisis in the Europe;
World Bank and IMF Yearly Meeting: over the weekend there will be a meeting of the IMF and World Bank that will address the financial crisis in Europe and the global economic slowdown.
US Dollar / Gold & Silver Prices – September Update
The Euro to USD conversion rate along with other exchange rates such as AUD/USD sharply fell yesterday; the EURO/USD declined by 0.80% to 1.3464, the AUD/USD fell by 3% and USD/CAD rose by 2%. The Federal Reserve’s announcement might have triggered the recent strengthening of USD. If the USD will continue to appreciate against major currencies such as the Euro, AUD and CAD, as it did throughout September and especially in the past couple of days, it further pressure gold and silver prices to trade down.
U.S. Treasuries / Gold Price – September Update
The US 10-year Treasury yields sharply fell 0.16 percent points to 1.72% – their lowest level in 2011; during September they have fallen by 0.51 percent points. The recent FOMC decision is likely to keep this downward trend and further reduce the LT US securities yields as traders dump other investments and run towards LT US securities before the Fed’s new plan will further decrease their yields. There was a negative correlation between the US long term Treasury yields and gold price daily percent changes in the last few months, but this pattern has shifted as seen in the chart below. It seems that many traders have started to shift from holding gold towards increasing their holding in LT US securities.
Current Gold and Silver Prices
The precious metals prices are currently traded down in the European markets:
Current gold price short term future (October 2011 delivery) is traded at $1,679.9 per t oz. a $61.8 or 3.55% decrease as of 16:30*.
Current silver price short term future is at $32.840 per t oz – a $3.738 or 10.22% decline as of 16:30*.
The current ratio of gold to silver prices is at 51.26.
Gold and Silver Prices Outlook:
Gold and silver prices have sharply fallen yesterday and they may continue their decline today – the August upward trend won’t repeat itself in September. The FOMC plan wasn’t received well by many traders as it may have triggered the recent dive in the financial markets. The shift in the markets might accompany with an ongoing strengthening of USD against major currencies, a decrease in long term securities yields and a decline in commodities prices. That being said, during the rest of September I still speculate that gold price will slowly recover from its sharp falls, but will most likely finish the month below their initial price levels from the beginning of the month. Silver price that usually is more unstable may remain even further below its initial price level.
Here is a reminder of the top events and reports that are planed for today (all times GMT):
19:00 – ECB conference Trichet speaks
World Bank and IMF Meeting
For further reading:
- Gold and silver prices outlook for September 2011
- Weekly Outlook for September 19-23
- Gold & Silver Prices | Weekly Recap 12-16 September
Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.