The prices of gold and silver rallied during most of last week. Will gold and silver continue to rise? The recent decision of Bank of Japan to double its inflation target to an annual 2% rate is another indicator for the Bank’s decision to implement its expanding monetary policy. BOJ also said it will intensify its asset purchase program next year by purchasing nearly 13 trillion yen per month starting January 2014. This news is likely to adversely affect the yen against the USD. This news may also affect precious metals via the Forex markets. Currently, gold and silver prices are rising. On today’s agenda: German ZEW economic sentiment, GB 10 Year Bond Auction, Canada Retails Sales, U.S. Existing Home Sales, ECB President Speaks, and Australia’s CPI for Q4 2012.
Here is a short outlook for precious metals for Tuesday, January 22nd:
Precious Metals – January Update
On Friday, the price of gold inched down by 0.22% to $1,687; Silver price, on the other hand, rose by 0.43% to $31.92. During the month, gold rose by 0.73%; silver, by 5.8%.
As seen below, the chart shows the changes in the normalized prices of precious metals during January (normalized to 100 as of December 31st). During recent weeks, the prices of silver and gold have bounced back from their tumble at the beginning of the month.
The ratio between the two precious metals increased on Friday to 52.85. During January the ratio declined by 4.79% as gold under-performed silver.
St. Deviation of Gold and Silver
The slow movement of both bullion rates is represented in the decline in precious metals prices’ volatility during January: the standard deviations of gold and silver (daily percent changes) reached 0.89% and 1.54%, respectively.
On Today’s Agenda
German ZEW economic sentiment: In December the ZEW indicator for Germany rose to reach 6.9 points; if Germany’s economic sentiment will further expand, the Euro will plausibly strengthened against other currencies including the USD;
GB 10 Year Bond Auction: the British government will have another monthly bond auction; in the previous bond auction, which was held during the second week of December, the average rate reached 1.8% – a slightly lower rate than in the previous auction;
Canada Retails Sales: This report will pertain to the retails sales in Canada as of November. It may affect the direction of USD/CAD currency pair, which is strongly correlated with commodities prices. In the previous report regarding October 2012, retails sales rose by 0.7%;
U.S. Existing Home Sales: in the previous report regarding November 2012 the number of homes sold rose to a seasonally adjusted annual rate of 5.04 million houses sold; if this trend will continue it may pull up the U.S dollar.
ECB President Speaks: Mario Draghi will give a speech in the New Year’s Reception in Frankfurt. He is likely to refer to the progress of the EU economy. If the ECB President will refer to ECB’s monetary policy this might affect the Euro;
Australia’s CPI for Q4 2012: This quarterly report will refer to the changes in the consumer price index. In the recent report regarding the third quarter, the CPI rose by 1.4% compared to the second quarter and by 2% compared to Q3 2011; this report could affect the Aussie dollar which is linked with commodities;
Currencies / Bullion Market – January Update
The Euro/ USD inched down on Friday by 0.41% to 1.3321. During the month, the Euro/USD rose by 0.97%. Moreover, some currencies such as Aussie dollar also depreciated on Friday against the USD by 0.34%. The recent drop of “risk currencies” may have slightly affected precious metals prices. Nonetheless, the correlations among gold, Euro and Aussie remained weaker than in previous months: during December and January, the linear correlation between gold and Euro /USD reached 0.08 (daily percent changes); the linear correlation between the gold and AUD /USD was 0.349 (daily percent changes). These weak correlations might suggest the recent rally of gold and silver didn’t coincide or resulted from the developments in the foreign exchange markets. Nonetheless, if the Euro and other risk currencies will appreciate against the USD, they are might help rally gold and silver.
Current Gold and Silver Rates as of January 22nd
Gold (short term delivery) is traded at $1,693.5 per t oz. a $6.5 or 0.39% increase as of 06:22*.
Silver (short term delivery) is at $32.05 per t oz – a $0.11or 0.34% increase as of 06:22*.
Daily Outlook for January 22nd
Prices of precious metals have rallied in recent weeks, and I guess they will continue to slowly climb up in the following days. The uncertainty around the future actions U.S policymakers will take regarding the debt ceiling and the spending cuts might affect not only the dollar but also precious metals. The recent decision of BOJ to raise the inflation target and future asset purchase program is likely to help rally precious metals as an alternative safe haven investment to the Japanese yen. The upcoming U.S existing home sales could affect not only the USD but also precious metals rates. If the housing market will show signs of progress, this could pressure down precious metals. Finally, if the Euro and other “risk currencies” will rally against the USD, they might positively affect precious metals.
Here is a reminder of the top events and publications that are scheduled for today and tomorrow (all times GMT):
10:00 –German ZEW economic sentiment
Tentative – GB 10 Year Bond Auction
13:30 – Canada Retails Sales
15:00 – U.S. Existing Home Sales
18:00 – ECB President Speaks
00:30 – Australia’s CPI for Q4 2012
09:30 – Minutes of MPC Meeting
14:00 – Bank of Canada’s Overnight Rate
15:30 – Bank of Canada’s Monetary Policy and Press Conference
02:45 – China flash Manufacturing PMI
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