The low volatility has returned to the precious metals markets. The prices of gold and silver, much like other commodities, remained virtually unchanged on the first day of the week. Will gold and silver resume their downward trend? Currently, gold and silver are traded up. On today’s agenda: Euro Area unemployment rate, German Factory Orders, Euro Area unemployment rate, China’s Trade Balance, and China New Loans.
Here is a short outlook for precious metals for Tuesday, January 8th:
Precious Metals – January Update
On Monday, the price of gold slipped by 0.16% to $1,646.3; Silver price on the other hand rose by 0.46% to $30.05. During the month, gold declined by 1.7%; silver, by 0.39%.
As seen below, the chart presents the developments in the normalized prices of precious metals during November and December (normalized to 100 as of November 30th). During recent weeks, the prices of silver and gold have had moderately declined.
The ratio between the two precious metals fell on Monday to 54.78. During the month the ratio slipped by 1.3% as gold has under-performed silver.
The gold and silver futures volumes of trade have risen in recent days as the markets woken up following the holiday season. On Friday the volume reached 276 thousand and 73 thousand, for gold and silver, respectively. These numbers are higher than the volume traded in the past couple of weeks back. If the volume will continue to rise today, this could suggest the odds of sudden sharp shifts in the prices of gold and silver due to high volume will decline. The chart below presents the volume of trading gold and silver futures in the CME in recent weeks.
On Today’s Agenda
Euro Area unemployment rate: the rate of unemployment of the EU edged reached 11.7% in October. This mean there is an ongoing slow growth in the unemployment. If in the upcoming report this trend will continue, it may adversely affect the Euro;
Euro Area Retail Sales: In October 2012, retail sales declined by 1.2%; if this report will continue to show a decline in sales index, it might weaken the Euro;
German Factory Orders: This report will refer to the developments in the factory orders of Germany for November; in the previous report the German factory orders increased by 3.9%;
China’s Trade Balance: as of the previous monthly update, China’s trade balance fell to a $19.6 billion surplus; if the surplus will further dwindle, it could indicate that China’s economic growth is slowing down and thus may adversely affect prices of precious metals.
China New Loans: This report will refer to the recent developments in China’s new loans given during last month. According to the recent report, the total loans changed direction and slightly increased; this report is another indicator to the economic progress of China;
Currencies / Bullion Market – January Update
The Euro/ USD rose on Monday by 0.37% to 1.3117. Nonetheless, during the month, the Euro/USD fell by 0.58%. Moreover, some currencies such as Canadian dollar also appreciated d on Monday against the USD by 0.13%. The rally of these “risk currencies” didn’t’ seem to affect precious metals. 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 is at -0.12 (daily percent changes); the linear correlation between the gold and USD/CAD was -0.22 (daily percent changes). These weak correlations might suggest the recent shifts in 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 change direction and fall against the USD, they might adversely affect precious metals.
Current Gold and Silver Rates as of January 8th
Gold (short term delivery) is traded at $1,649 per t oz. a $3.1 or 0.19% increase as of 05:55*.
Silver (short term delivery) is at $30.18 per t oz – a $0.1or 0.34% increase as of 05:55*.
Daily Outlook for January 8th
Prices of precious metals remained nearly unchanged on Monday. I still guess the prices of gold and silver will continue to fall as the week will progress. The rise in the volume of trade is likely to low the volatility of precious metals during the week. The uncertainty around the future moves of U.S policymakers regarding raising debt ceiling or the future spending cuts might affect gold and silver as the month will progress. In the meantime, the next major event that could affect precious metals is the first FOMC meeting in 2013 scheduled to the last days of January. The upcoming reports that will come out today including: Euro Area Retail Sales, German Factory Orders and Euro Area unemployment rate could affect not only the Euro but also precious metals. If these reports will show the EU economy is growing, they could positively affect precious metals via the Euro. China’s reports could help rally precious metals if they will show growth for this economy. Finally, if the Euro and other “risk currencies” will depreciate against the USD, they might also adversely 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 – Euro Area unemployment rate
11:00 – Euro Area Retail Sales
11:00– German Factory Orders
Tentative –China’s Trade Balance
Tentative – China New Loans
10:00 – Final EU GDP 3Q 2012 Estimate
11:00– German Industrial Production
18:00 – U.S 10 Year Bond Auction
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