The prices of silver and gold didn’t do much yesterday as gold slightly declined and silver rose. HSBC published its China flash Manufacturing PMI, in which the PMI rose from 51.5 in December to 51.9 in January. This means the manufacturing sectors in China are growing at a slightly faster pace in recent weeks. Bank of Canada left its Overnight Rate unchanged at 1% but also reduced its 2013 GDP outlook from 2.3% to 2%. This news lead the Canadian dollar to depreciated against major currencies. How will this news affect precious metals? Major investment banks such as Morgan Stanley and Goldman Sachs estimate gold prices will rally in the coming months on account of U.S policymakers tacking the debt ceiling issue. Currently, gold and silver prices are declining. On today’s agenda: Spain’s unemployment Change Flash German, French and Euro Zone Manufacturing PMI and U.S. Jobless Claims.
Here is a short outlook for precious metals for Thursday, January 24th:
Precious Metals – January Update
On Wednesday, the price of gold declined by 0.38% to $1,686.7; Silver price on the other hand rose again by 0.76% to $32.41. During the month, gold increased by 0.71%; silver, by 7.41%.
As seen below, the chart presents 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 in recent weeks.
The ratio between the two precious metals declined again on Wednesday to 52.04. During January the ratio declined by 6.24% as gold under-performed silver.
On Today’s Agenda
Spain’s unemployment Change: the rate of unemployment of the Spain increased again to 25%. This mean, the employment situation in Spain isn’t improving. If in the upcoming report this trend will continue, it may negatively affect the Euro;
Flash German, French and Euro Zone Manufacturing PMI: In the previous report regarding December 2012, the German PMI slipped to 46 i.e. the manufacturing conditions are contracting at a slightly faster rate. This report serves as an indicator to the economic shifts of the Euro Area’s leading economies’ manufacturing conditions; this news, in turn, may affect the Euro/USD and commodities;
U.S. Jobless Claims Weekly Report: in the recent report the jobless claims declined by 37k to reach 335k; this upcoming weekly report may affect the U.S dollar and consequently precious metals;
Currencies / Bullion Market – January Update
The Euro/ USD inched down on Wednesday by 0.03% to 1.3318. During the month, the Euro/USD rose by 0.95%. Moreover, some currencies such as Aussie dollar also depreciated on Wednesday against the USD by 0.10%. Canadian dollar also sharply depreciated against the USD by 0.75%. The recent modest fall of “risk currencies” may have slightly contributed to the modest drop in gold 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 -0.23 (daily percent changes); the linear correlation between the gold and AUD /USD reached 0.35 (daily percent changes). If the Euro and other risk currencies will continue to depreciate against the USD, they are might adversely gold and silver.
Current Gold and Silver Rates as of January 24th
Gold (short term delivery) is traded at $1,679.7 per t oz. a $7.2 or 0.43% decrease as of 07:04*.
Silver (short term delivery) is at $31.94 per t oz – a $0.49or 1.52% decrease as of 07:04*.
Daily Outlook for January 24th
Prices of precious metals have slightly moved yesterday and this low volatility is likely to continue today. My guess is that gold and silver will slowly decline during the day. The recent Chinese PMI report may help rally commodities prices including gold and silver. On the other hand, the recent decision of the Indian government to raise taxes on gold imports is likely to keep pulling down the demand for gold in India. BOC’s decision to keep rate unchanged and lower the GDP outlook is likely to adversely affect commodities prices via the changes in the Canadian dollar. The future talks around steps U.S policymakers will take to tackle the debt ceiling and the spending cuts issues might affect precious metals in the coming weeks. The upcoming EU flash Manufacturing PMI could affect not only the Euro but also precious metals. If the PMI will decline again, it could signal a drop in the manufacturing sectors in EU and consequently may adversely affect commodities prices including gold and silver. If BOC will decide to change its short term rate, it could affect the Canadian dollar, which is still correlated with precious metals. Finally, if the Euro and other “risk currencies” will further fall against the USD, they might pull down precious metals.
Here is a reminder of the top events and publications that are scheduled for today and tomorrow (all times GMT):
08:00 – Spain’s unemployment Change
08:30 – Flash German, French and Euro Zone Manufacturing PMI
13:30 – U.S. Jobless Claims Weekly Report
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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