The gold and silver market continued to heat up and sharply increased yesterday. The recent non-farm payroll report didn’t meet expectations, which resulted in the depreciation of the USD against leading currencies and the recovery of gold and silver prices. The slow progress in the U.S economy and the fiscal problems it faces is likely to keep the FOMC buying long term bonds at the same $85 billion a month rate. This is likely to keep gold and silver from tumbling further down. Will gold and silver correct for the staggering rally? On today’s agenda: Bank of Canada’s Overnight Rate, Bank of Canada’s Monetary Policy and Press Conference, MPC Asset Purchase and Rate Votes, and China Manufacturing PMI.
Here is a short overview for bullion for Wednesday, October 23rd:
Gold and Silver – October Review
On Tuesday, gold jumped by 2.04% to $1,342.4; Silver also rose by 4.97% to $22.76. During October, gold increased by 1.18%; silver, by 4.97%. In the chart below are the normalized rates of precious metals for 2013 (normalized to 100 as of September 30th). The prices of gold and silver have rallied in the past several days.
The ratio between the two precious metals fell again on Tuesday to 58.98. During October, the ratio decreased by 3.61% as silver has slightly out-performed gold.
The gold and silver futures volumes of trade have increased and reached on Tuesday 175 thousand and 49 thousand, respectively. For gold this trade volume is the highest level in the past several days. If the volume continues to pick up in the coming days, this could suggest the odds of sudden sharp changes in the rates of gold and silver as a result of high volume will increase.
On Today’s Agenda
MPC Asset Purchase and Rate Votes: In the last MPC meeting, the Bank left the rate unchanged at 0.5% and the asset purchase program at £375 billion; this vote count will show how many MPC members voted on any changes to the asset purchase program or interest rate;
Bank of Canada’s Overnight Rate: The Bank of Canada will decline on its overnight rate decision – the rate is currently at 1%. The BOC may leave its policy unchanged and maintain its interest rate at its current level; the economic developments in Canada might prompt BOC to eventually reduce its cash rate;
Bank of Canada’s Monetary Policy and Press Conference: The Bank of Canada will come out with its quarterly monetary policy report and will also have a press conference; if the back presents any changes in this press conference, it could affect the Canadian dollar;
China Manufacturing PMI (flash): HSBC will come out with its flash manufacturing PMI survey for October. Last month’s report regarding September 2013 the Manufacturing PMI rose again to 51.2 – i.e. China’s manufacturing sectors is growing at a slightly faster pace. If in the upcoming report the PMI continues to rise, it could signal growth in China’s economy;
Currencies / Precious Metals Correlations – October Update
On Tuesday, the Euro/ USD currency pair sharply rose by 0.73% to 1.3781. During October, the Euro/USD rose by 2.17%. Moreover, other currencies such as the Aussie dollar and Canadian dollar also appreciated yesterday against the U.S dollar by 0.57% and 0.17%, respectively. The correlations among gold, silver and Euro remained robust in recent weeks, e.g. the correlation between the Euro/USD and gold price is 0.41 during September/October.
Here is a reminder of the main events and publications that are scheduled for today and tomorrow (all times GMT):
09:30 –MPC Asset Purchase and Rate Votes
15:00 – Bank of Canada’s Overnight Rate
15:30 – Bank of Canada’s Monetary Policy and Press Conference
02:45 – China Manufacturing PMI
09:00 – Flash German, French and Euro Zone Manufacturing PMI
13:30 – U.S. Jobless Claims Weekly Report
15:00 – U.S. New Home Sales
17:45 –BOE Governor Carney Speaks
For further reading:
- Gold and Silver Outlook for October 2013
- Gold and Silver Weekly Forecast for October 21-25
- Weekly Outlook of Financial Markets for October 21-25
- Gold and Silver Yearly Outlook For 2013
- Is the Golden Era of Gold Over?
- Will Gold Recover from its Recent Fall?