The prices of gold and silver continued their downfall as both metals declined again yesterday for the second consecutive day. The recent U.S housing report showed little change in the housing market and thus may also have a moderate effect on the USD and precious metals. BOJ, as expected, delivered its third monetary injection in the past four months. The current asset purchase program is at 76 trillion yen ($906 billion) – a 10 trillion yen increase. This news is likely to further weaken the yen against the USD. This news could also affect bullion rates via the foreign exchange market. The budget talks between U.S government officials seem to stagnate with little progress. Will precious metals further fall today? Currently the prices of gold and silver are sharply falling. On today’s agenda: Retails Sales reports for GB and Canada, Final U.S GDP 3Q 2012 Estimate (update: GDP grew by 3.1%), U.S. Jobless Claims (update: jobless claims rose by 17k to 361k), U.S. Existing Home Sales, and Philly Fed Manufacturing (update: Philly Fed bounced back to +8.1) .
Here is a short outlook for precious metals for Thursday, December 20th:
Precious Metals – December Update
On Wednesday, the price of gold declined again by 0.19% to $1,666; Silver price also fell by 1.78% to $31.05. During the month, gold decreased by 2.58%; silver, by 6.5%.
In the chart below are the developments in the normalized prices of precious metals during December (normalized to 100 as of November 30th). During recent weeks, the price of silver and gold had a sharp downward trend.
The ratio between the two precious metals rose again on Wednesday to 53.69. During December, the ratio rose by 4.19% as gold out-performed silver.
Precious metals rates’ volatility has slightly subsided yesterday, which resulted in a moderate decrease in both metals’ standard deviations of their daily percent change. Nonetheless, the daily percent change standard deviation of silver is still higher this month compared to previous months: the standard deviations of gold and silver (daily percent changes) reached 0.76% and 1.89%, respectively.
On Today’s Agenda
Retails Sales of Great Britain: This report may affect the British Pound currency. In the previous report regarding October 2012, retails sales fell by 0.8%;
Retails Sales of Canada: In the previous report regarding September 2012, retails sales edged up by 0.1%;
Final U.S GDP 3Q 2012 Estimate: In the previous estimate, the U.S GDP during the third quarter expanded by 2.7%, which was close to the figure anticipated; in the second quarter, the GDP growth rate was only 1.3% (annual rate). This shows a modest gain in the growth rate for the US’s GDP. If there will be a sharp change in the growth rate from second to third estimate, this could affect precious metals rates;
U.S. Jobless Claims Weekly update: in the previous report the jobless claims declined again by 29k to reach 343k; this upcoming weekly update may affect the U.S dollar;
U.S. Existing Home Sales: in the previous report for October the number of homes sold edged up: the seasonally adjusted annual rate rose to 4.79 million home sales; if this trend will continue it may pull back the U.S dollar.
Philly Fed Manufacturing Index: In the November survey, the growth rate declined from +5.3 in October to -10.7 in November. If the index will continue to fall it may adversely affect not only U.S Dollar but also bullion prices (the previous Philly Fed review);
Currencies / Bullion Market – December Update
The Euro/ USD edged down on Wednesday by 0.02% to 1.3227. During the month, the Euro/USD increased by 1.86%. Moreover, several currencies such as Aussie dollar also depreciated again yesterday against the USD by 0.51%. The correlations among gold, Euro and Aussie dollar have weakened during the month: during the past several weeks, the linear correlation between gold and Euro /USD declined to 0.08 (daily percent changes); the linear correlation between the silver and AUD /USD was 0.15 (daily percent changes). This weak correlation might suggest the daily changes in precious metals didn’t coincide with the developments in major currencies market. Nonetheless, if the Euro and other risk currencies will bounce back and rise against the USD, they are likely to positively affect precious metals rates.
Current Gold and Silver Rates as of December 20th
Gold (short term delivery) is traded at $1,642 per t oz. a $25.7 decrease as of 17:34*.
Silver (short term delivery) is at $29.84 per t oz – a $1.28 decrease as of 17:34*.
Daily Outlook for December 20th
The prices of gold and silver continued their downward trend yesterday. This recent downward trend continue to seem less related to the developments in the currencies markets as the relation among gold, silver and major currencies pairs has weakened in many cases. According to the CME, total market volume for gold and silver was still relatively low. If the volume will continue to fall, it could raise the odds of sudden sharp shifts in certain days of gold and silver.
The talks in Congress to resolve the fiscal cliff are still far from over and as long as these talks continue to drag, they keep the uncertainty around the future progress of the U.S economy and thus may curb the rise in commodities prices. The recent update on this front is that Boehner and other Republicans are still trying to persuade Obama with their plan in which, among other, the government will only raise taxes on households earning over $1 million per year. The upcoming reports including: Final U.S GDP 3Q 2012, U.S. Jobless Claims, U.S. Existing Home Sales and Philly Fed Manufacturing Index could affect the USD. If these reports will be positive and show growth they could help rally the USD and thus may pull back precious metals. Finally, if the Euro and other “risk currencies” will bounce back against the USD, they are likely to help rally precious metals.
Here is a reminder of the top events and publications that are scheduled for today and tomorrow (all times GMT):
09:30 –Retails Sales GB
13:30 –Retails Sales Canada
13:30 – Final U.S GDP 3Q 2012 Estimate
13:30 – U.S. Jobless Claims Weekly Report
15:00 – U.S. Existing Home Sales
15:00 – Philly Fed Manufacturing Index
09:30 – Great Britain Current Account
09:30 – Great Britain Net borrowing
09:30 – GB revised GDP Q3 2012
13:00 – Canada’s CPI
13:30 – Canada’s GDP by Industry
13:30 – U.S Core Durable Goods
13:30 – U.S Personal Spending
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