The prices of gold and silver changed direction and declined on Wednesday along with other assets including crude oil, natural gas and stock markets. The hype over the elections of the incumbent President Obama for a second term didn’t last long as the markets tumbled down yesterday. Currently, the prices of gold and silver are increasing. All eyes in the U.S are on the next move of the U.S government in regards to the “fiscal cliff”. In the mean time, the market interest is likely to shift back today to Europe and the debt crisis. On today’s agenda: Euro-group Meeting, ECB Rate Decision, Great Britain Bank Rate & Asset Purchase Plan, Canadian Trade Balance, American Trade Balance, U.S. Jobless Claims, RBA Monetary Policy Statement and China’s CPI.
Here is a short outlook for precious metals for Thursday, November 8th:
Precious Metals –November Update
On Wednesday, Gold edged down by 0.06% to $1,714; Silver also declined by 1.12% to $31.67. During the month, gold declined by 0.3%; silver, by 2%.
As seen below, the chart shows the changes in the normalized prices of precious metals during recent weeks (normalized to 100 as of October 18th). During November, both gold and silver slightly declined.
The ratio between the two precious metals rose on Wednesday to 54.12. During the month, the ratio rose by 1.74% as gold slightly out-performed silver.
St. Deviation of Gold and Silver
The rise in the volatility of both bullion rates is represented in the increase in precious metals prices’ standard deviations during the month: the standard deviations of gold and silver (daily percent changes) reached during the month 1.38% and 2.51%, respectively. These are the highest standard deviations levels this year (UTD).
On Today’s Agenda
Euro-group Meeting: The Euro-group Meeting will be held in Brussels and the EU ministers of finance will talk over the recent political and monetary developments in Europe; in the last meeting there was little headway and the market didn’t react to the news coming out of this meeting;
ECB Rate Decision: last month, the interest rate remained unchanged. Since many EU countries are still struggling, and since the FOMC announced in September of QE3, ECB might decide to make another rate reduction in the near future by another 0.25pp. If ECB will cut the rate again, it may affect the Euro;
MPC Rate Decision & Asset Purchase Plan: Bank of England will announce its basic rate for November and of any augmentations to its asset purchase plan; as of October ,BOE’s rate remained unchanged at 0.5% and the asset purchase plan was left at £375 billion;
American Trade Balance: This monthly report for September will show the recent shifts in imports and exports of goods and services to and from the U.S, including commodities; according to the previous American trade balance report regarding August the goods and services deficit rose during the month to $44.2 billion;
U.S. Jobless Claims Weekly Update: in the recent report the jobless claims decreased by 9k to 363k; this upcoming weekly update may affect the U.S dollar and consequently the prices of commodities;
Canadian Trade Balance: In the previous report regarding August 2012, exports slipped by 0.1% and imports fell by 3.1%; as a result, the trade deficit contracted from a $2.5 billion deficit in July to $1.3 billion deficit in August; this report may affect the Canadian dollar which tends to be strongly correlated with prices of bullion;
Reserve Bank of Australia – Monetary Policy Statement: The RBA will publish its quarterly report regarding the Bank’s monetary policy;
China’s CPI: during August the Chinese inflation rate edged down to an annual rate of 1.9%; this rate is well below China’s inflation target of 4% in annual terms. If the inflation will continue to dwindle it could indicate that China’s economic progress isn’t expanding; China is among the leading countries in importing gold;
Currencies / Bullion Market – November Update
The Euro/ USD changed direction and declined on Wednesday by 0.34% to 1.2771. During November, the Euro/USD declined by 1.46%. Moreover, many other currencies such as Canadian dollar also depreciated yesterday against the USD by 0.46%. The linear correlation between gold and Euro/USD remains mid-strong and robust: during October/November, the linear correlation between gold and Euro /USD reached 0.55 (daily percent changes); the linear correlation between the gold and USD/ Canadian dollar was -0.32 (daily percent changes). Thus, if the Euro and other risk currencies will continue to dwindle against the USD, they are likely to adversely affect gold and silver.
Current Gold and Silver Rates as of November 8th
Gold (December 2012 delivery) is traded at $1,719 per t oz. a $5 or 0.29% increase as of 06:39*.
Silver (December 2012 delivery) is at $31.93 per t oz – a $0.26 or 0.83% increase as of 06:39*.
Daily Outlook for November 8th
The prices of bullion changed direction and declined on Wednesday. The volatility of the precious metals prices has risen in recent days perhaps due to the market reaction to the U.S Presidential elections. Thus, the volatility might decline in the days to follow. Today’s Euro-group meeting and ECB rate decision could affect the Euro if there will be big headlines coming out of any of these events. I think ECB will eventually make another rate cut but this might not happen this time; the Euro-group meeting won’t bring any big headlines. The upcoming U.S financial reports to be published today including American Trade Balance and U.S. Jobless Claims could affect the strength of the USD, which could determine the direction of gold and silver. Finally, if the Euro and other “risk currencies” will continue to dwindle against the USD, then they are likely to negatively affect precious metals.
Here is a reminder of the top events and publications that are scheduled for today and tomorrow (all times GMT):
All Day – Euro-group Meeting
12:00 – Great Britain Bank Rate & Asset Purchase Plan
12:45 – ECB Press Conference and Rate Decision
13:30 –Canadian Trade Balance
13:30 –American Trade Balance
13:30 – U.S. Jobless Claims
01:30 – RBA – Monetary Policy Statement
02:30 – China’s CPI
06:30 –China Industrial Production
14:55 – UoM Consumer Sentiment
Tentative –China’s Trade Balance
Tentative –OPEC Monthly Report
For further reading: