The market has changed direction again as major commodities and currencies rallied from Monday’s falls. Gold and silver prices started off the day falling but soon after they had changed direction and finished the day in the green. The positive news coming from Greece of a possible agreement on a bailout package might have helped rally precious metals prices and the Euro. From the other side of the globe, Chairman of the Federal Reserve stated in his testimony the challenges the U.S. economy is facing including cutting the budget deficit and reaching full employment. These news items may have helped pushing up gold and silver up. Currently gold and silver prices have changed direction and are falling. Today, China’s consumer price index will come out.
Here is a report of major news and events, and an analysis of metals prices for Wednesday, February 8th:
Gold and Silver– February Update
Gold price sharply rose on Tuesday by 1.36% to $1,748.4; silver also rose by a similar rate of 1.32% to $34.19. During February, gold slightly rose by 0.46% and silver by 2.8%.
The chart below shows the development of gold and silver during the past few weeks (metals prices are normalized to 100= January 24th).
The ratio between gold and silver slightly rose on Tuesday, February 7th and reached 51.13. During February the ratio fell by 2.28% as silver has very slightly outperformed gold. In the chart below is the development of this ratio during recent months.
Bernanke’s Testimony
Following the recent FOMC decision to keep low rates until the end of 2014, the recent testimony of Bernanke before the U.S. Senate referred to the economic outlook of the U.S. Bernanke didn’t hint of another QE program, but he did point out to the challenges the U.S. economy will face in the years to come including bringing long term unemployed back to the workforce, and cutting the budget deficit. This testimony may have pulled down the U.S. dollar.
On Today’s Agenda
Chinese CPI: during November, the Chinese inflation rate sharply fell to an annual rate of 4.2%; this rate is coming very close to China’s inflation target of 4% in annual terms. There are speculations of another drop in the CPI. If the rate will fall below 4% it could means the People Bank of China’s will be able to ease some of its restrictions; China is among the leading countries in importing gold and silver;
U.S. Treasuries / Gold & Silver Prices – February
The U.S. 10-year Treasury yield sharply rose on Tuesday by 0.07 percent points to 2%; during February the 10 year treasury yield rose by 0.17 percent point. If the L.T U.S. treasury yield will continue to rise, it might also indicate precious metals will follow and also increase.
Forex / Gold & Silver Market – February
The Euro/U.S Dollar changed direction and sharply rose on Tuesday by 0.99% to 1.3260. During February Euro/U.S Dollar rose by 1.35%; other leading exchange rates such as Canadian dollar and Australian dollar also strongly appreciated against the U.S. dollar. During 2012 there was a strong linear correlation among the EURO, AUD and CAD and gold and silver prices. If the Euro and other “risk currencies” will continue to trade down it could indicate that metals prices will also decrease. Currently, the Euro/USD is moderately falling.
Current Gold and Silver Prices February 8th
Gold (March 2012 delivery) is traded at $1,731.5 per t oz. a $16.9 or 0.97% decrease as of 18:32*.
Silver (March 2012 delivery) is at $33.745 per t oz – a $0.449 or 1.31% decrease as of 18:31*.
(* GMT)
Gold and Silver Prices Forecast
Gold and silver prices changed direction again and sharply rose along with other commodities prices and major currencies. The upcoming publication of the Chinese CPI might stir up the Asia markets and may also affect the direction of precious metals. The news from Greece will continue to occupy the financial markets and influence the direction of Euro. In turn, the development of the Euro might also affect the direction of gold and silver prices.
Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):
Today
03:00 – China’s CPI
Tomorrow
09:30 – Great Britain Manufacturing Production
12:00 – Great Britain Bank Rate & Asset Purchase Plan
13:30 – ECB Press Conference and Euro Rate Decision
13:30 – Department of Labor Report – U.S. Unemployment Claims
15:30 – EIA U.S. Natural Gas Market Report
tentative –China’s Trade Balance
For further reading: