The prices of silver and gold changed pace yesterday from their slow movement at the beginning of the week and tumbled down. Following yesterday’s fall, any gain recorded in precious metals from earlier this week was erased. The recent positive news from the U.S may have contributed to the strengthening of the USD against certain currencies such as Aussie dollar and Japanese yen and at the same time pulling down precious metals. These news items include: the rise in the flash manufacturing PMI in January to 56.1 (in December it reached 54), and the drop of 5k in the jobless claims to reach by January 19th 330k. The manufacturing conditions in Germany also improved in January as the PMI rose from 50.3 in December to 53.6 in January. This news may have contributed to the rally of the Euro. Will gold and silver continue to fall today? Currently, gold price is slowly declining. On today’s agenda: German Business Climate Survey, Flash GB GDP Q4 2012, Canada’s CPI and U.S New Home Sales.
Here is a short outlook for precious metals for Friday, January 25th:
Precious Metals – January Update
On Thursday, the price of gold fell by 1% to $1,669.9; Silver price changed direction and tumbled down by 2.2% to $31.7. During the month, gold slipped by 0.29%; silver rose by 5.05%.
In the chart below are the developments in the normalized prices of precious metals during the month (normalized to 100 as of December 31st). During recent weeks, the prices of silver and gold have rallied in recent weeks only to sharp change direction yesterday and decline yesterday.
The ratio between the two precious metals rose on Thursday to 52.68. During January the ratio declined by 5.08% as gold under-performed silver.
Despite the different percent changes between gold and silver in recent years, the linear correlation of the two precious metal daily percent changes is still robust, as indicated in the chart herein. The linear correlation is slightly weaker than in October and November but moderately stronger than in December 2012 and January 2012.
On Today’s Agenda
U.S. New Home Sales: in the previous report (for November), the sales of new homes rose to an annual rate of 377,000 – a 4.4% gain (month over month); if the number of home sales will rally, it may indicate a sign of some recovery in the U.S real estate market which may also affect the direction of the USD.
German Business Climate Survey: In the recent report for December 2012, the business climate index increased from 101.4 in November to 102.4 in December; if this trend will continue, it might positively affect the Euro;
Flash GB GDP Q4 2012: This report will present the first estimate of the quarterly growth rate of the British economy during the fourth quarter of 2012; during the third quarter the GB economy expanded by 1% (Q-2-Q);
Canada’s CPI: According to the Canadian CPI report for November 2012, the core CPI remained flat during the month. This report might affect the Canadian dollar, which is also strongly linked with commodities;
Currencies / Bullion Market – January Update
The Euro/ USD rose on Thursday by 0.44% to 1.3376. During the month, the Euro/USD rose by 1.39%. Alternatively, some currencies such as Aussie dollar sharply depreciated on Thursday against the USD by 0.99%. The yen also sharply depreciated against the USD by 1.97%. The fall of these currencies against the USD may have contributed to the drop in bullion prices. Nonetheless, the correlations among gold, Canadian dollar and Aussie remained weaker than in 2012: during January, the linear correlation between gold and USD/ Canadian dollar reached -0.26 (daily percent changes); the linear correlation between the gold and AUD /USD reached 0.41 (daily percent changes). If the Euro and other risk currencies will appreciate against the USD, they are might positively gold and silver.
Current Gold and Silver Rates as of January 25th
Gold (short term delivery) is traded at $1,669.1 per t oz. a $0.8 or 0.05% decrease as of 09:11*.
Silver (short term delivery) is at $31.73 per t oz –a 0.01% increase as of 09:11*.
(* GMT)
Daily Outlook for January 25th
Prices of precious metals changed direction and tumbled down. This sharp fall may have been stem, in part, from the recent positive news from the U.S that offset the positive effect the news of the progress in China and Europe may have had on commodities prices. The recent decision of the Indian government to raise taxes on gold imports is likely to play in the background and curb any sharp rise in the prices of gold and silver. My guess is that gold and silver will bounce back today after yesterday’s sharp fall. The upcoming reports including U.S new home sales may affect not only the USD but also precious metals. If the report will show the housing market is progressing, it could pull down the prices of bullion. Finally, if the Euro and other “risk currencies” will rally against the USD, they might pull up precious metals.
Here is a reminder of the top events and publications that are scheduled for today (all times GMT):
Today
09:00 – German Business Climate Survey
09:30 – Flash GB GDP Q4 2012
13:00 – Canada’s CPI
15:00 – U.S. New Home Sales
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