Gold and silver prices declined yesterday mainly over the CME margin requirements hike on gold and silver contracts, but currently they already bounce back and incline. The speculation around a bailout plan of the European bailout plan by European policy markets is likely to continue affecting the financial markets and the uncertainty. Today, the U.S. consumer confidence report will be published, and the Euro Area monetary developments for August.
Here is a market outlook of precious metals prices for today, September 27th:
Gold and Silver Prices –September
Gold and silver prices declined yesterday: Gold price shed on Monday by 2.74% of its value to $1,594; silver price fell by 0.42% to $29.98. During September, gold price declined by 12.9% and silver price fell by 28.2%. The chart below shows the recent drop in gold and silver prices in the three business days (normalized gold and silver prices (August 31st 2011=100)).
The ratio between gold and silver prices changed direction and slightly decreased on Monday, September 26th to 53.20. During September, silver price declined by a much higher rate than gold price as the ratio increased by 21.3%.
On Today’s Agenda:
Monetary Developments in the Euro Area: This report will show the changes during August in the M3, M1 and private sector loans in the Euro Area. In the previous July report, the M1 fell to 0.9%. The annual growth rate of loans to private sector slipped to 2.4% in July. If this decline will continue in August it could serve as another indicator of a slowdown in economic activity in Europe and may affect ECB’s upcoming interest rate decision (see here the last report);
U.S. Consumer Confidence: in the previous report, the consumer confidence index declined during August compared with July’s index. The current expectations are that this index may continue to drop in the upcoming report;
US Dollar / Gold & Silver Prices – September Update
The EURO/USD exchange rate along with other exchange rates slightly inclined yesterday: the Euro to USD rose by 0.24% to 1.3533; the AUD/USD added 0.55%; the USD/CAD slipped by 0.29%. The recovery of the major currencies against the USD is probably among the forces that curbed the sharp falls in gold and silver prices in the past couple of days.
U.S. Treasuries / Gold Price – September Update
The US 10-year Treasury yields increased by 0.07 percent points to 1.91%, but during September they have fallen by 0.32 percent points. The recent announcement of CME to raise margins also referred to long term securities so the increase in yields coincided with the margin hikes. There was a negative correlation between the US long term Treasury yields and gold price daily percent changes in recent months (in September the correlation was -0.386) , so that if the US securities’ demand will rise, they may also coincide with the increase in gold price.
S&P500 / Gold Price – September Update
The S&P500 index increased on Monday by 2.33%; during September the S&P500 index declined by 4.59%. The negative correlation between the S&P500 index and gold price (as of September it was -0.308) suggest that yesterday’s decline in gold price was partly related to the increase in US stock markets. But if the stock markets will continue to incline during the day, they might also affect gold price and curb some of its current rises.
Current Gold and Silver Prices
The precious metals prices are currently traded sharply up in the European markets:
Current gold price short term future (October 2011 delivery) is traded at $1,659.9 per t oz. a $65.1 or 4.08% increase as of 09:21*.
Current silver price short term future is at $31.915 per t oz – a $1.915 or 6.47% incline as of 09:21*.
The current ratio of gold to silver prices is at 51.98.
Gold and Silver Prices Outlook:
Gold and silver prices seem to have ended their correction yesterday with the CME margin hike, and now start the slow recovery of gold and silver prices in the days to come. The negative US housing report (new home sales) may have helped the recovery of gold and silver prices. More importantly, the recovery of major commodities including gold, silver and crude oil today may continue throughout the rest of the week as the speculation around a European bailout program continues to run high.
By the end of September I still speculate that gold and silver prices will slowly recover from their sharp drops in the past few days, but will finish the month well below their initial price level from the beginning of September.
Here is a reminder of the top events and reports that are planed for today (all times GMT):
09:00 – Monetary Developments in the Euro Area
15:00 – US Consumer Confidence
13:30 –Report on U.S. Core Durable Goods
15:30 – EIA report on crude oil stockpiles
22:00 – Bernanke Speaks
For further reading:
- Gold and silver prices outlook for September 2011
- Weekly Outlook for September 26-30
- Gold & Silver Prices | Weekly Recap 19-23 September
Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.