The prices of gold and silver declined yesterday. This decline continued last week‘s downward trend. The decline of precious metals coincided with the fall of several currencies including the Euro Aussie dollar and Canadian dollar against USD. Will gold and silver continue to fall? Today the FOMC will start its two day deliberations that will end tomorrow. Yesterday, several reports came out: based on the U.S core durable goods report, new orders rose in December by 4.6%; pending home sales index fell by 4.3%; EU monetary development report showed a drop in M1, M3 and loans for private sector. The U.S reports showed a mixed signal regarding the progress of the US economy. The EU monetary development report showed the EU economy isn’t progressing. This news may have contributed to the fall of the Euro yesterday. Currently, gold and silver are trading up. On today’s agenda: German Consumer Climate, and U.S Consumer Confidence.
Here is a short outlook for precious metals for Tuesday, January 29th:
Precious Metals – January Update
On Monday, the price of gold declined by 0.22% to $1,652.9; Silver price also declined by 1.36% to $30.76. During the month, gold decreased by 1.31%; silver rose by 1.93%.
As seen below, the chart presents the development in the normalized prices of precious metals in January (normalized to 100 as of December 31st). During recent days, the prices of silver and gold have declined.
On Today’s Agenda
German Consumer Climate: Gfk group will come out with its German consumer climate index. If this report will continue to show a fall, it might pull down the Euro;
U.S Consumer Confidence: according to the previous report, the consumer confidence index decreased in November (M-o-M). The current expectations are that the January index may bounce back; this report might affect commodities markets;
Currencies / Bullion Market – January Update
The Euro/ USD edged down on Monday by 0.06% to 1.3456. During the month, the Euro/USD increased by 1.99%. Moreover, some currencies such as Aussie dollar and Canadian dollar depreciated yesterday against the USD by 0.06% and 0.04%, respectively. The recent depreciation of these “risk currencies” may have contributed to the recent fall in precious metals. The correlations among gold, Canadian dollar and Aussie have strengthened in recent weeks: during January, the linear correlation between gold and USD/CAD reached -0.27 (daily percent changes); the linear correlation between the gold and AUD /USD reached 0.44 (daily percent changes). If the Aussie dollar and Canadian dollar will continue to depreciate against the USD, they might adversely affect gold and silver.
Current Gold and Silver Rates as of January 29th
Gold (short term delivery) is traded at $1,662.6 per t oz. a $7 or 0.42% increase as of 06:52*.
Silver (short term delivery) is at $31.08 per t oz – a $0.29 or 0.94% increase as of 06:52*.
Daily Outlook for January 29th
Prices of precious metals declined again on the first day of the week and thus continued their downward trend from last week. The FOMC will start today its two day meeting that will conclude tomorrow with a statement and press conference. I still guess that the FOMC won’t change its current monetary program that consists of $85 billion a month purchase program: the Fed purchase every month $45 billion long term securities and $40 billion mortgage backed securities.
The recent decision of the Indian government to hike taxes on gold imports is likely to curb the growth in demand for gold in India. The upcoming U.S reports including consumer confidence report could affect not only the USD but also precious metals: If this report will demonstrate the U.S economy is growing, it might pull down precious metals prices. Finally, if the Euro and other “risk currencies” will fall against the USD, they might also adversely affect bullion.
Here is a reminder of the top events and publications that are scheduled for today and tomorrow (all times GMT):
07:00 – German Consumer Climate
15:00 – U.S Consumer Confidence
08:00 – KOF Economic Barometer
Tentative – Flash Spanish GDP Q4 2012
Tentative – Italian 10 Year Bond Auction
13:15 – ADP estimate of U.S. non-farm payroll
13:30 – First U.S GDP 4Q 2012 Estimate
19:15 – FOMC Meeting
For further reading:
- Gold and Silver Outlook for January 28- February 1
- Weekly Outlook Financial Markets for January 28- February 1
- Gold and Silver Outlook for January
- Gold and Silver Yearly Outlook For 2013