The prices of silver and gold remained virtually unchanged yesterday as both metals inched up. Their modest rally coincided with the rise of “risk currencies” such as Euro and Aussie dollar against the USD. Will gold and silver continue to trade up? Currently, gold and silver are little changed. On today’s agenda: EU Industrial Production, Italian 10 Year Bond Auction, Governor King speaks, BOE Inflation Report, U.S. Retail Sales Report, U.S 10 Year Bond Auction and BOJ Monetary Policy.
Here is a short outlook for precious metals for Wednesday, February 13th:
Precious Metals – February Update
On Tuesday, the price of gold inched up by 0.03% to $1,648.9; Silver also rose by 0.35% to $31.02. During the month, gold decreased by 0.70%; silver, by 1.01%. The modest gain in precious metals rates coincided with the developments in the forex market: the Euro, Japanese yen and Aussie dollar appreciated against the USD by 0.37%, 0.91% and 0.49%, respectively. The linear correlation between and several leading currencies pairs such as USD/Yen and AUD/USD are still mid-strong at -0.29 and 0.45, respectively. They suggest that if these currencies will continue to rally against the USD, they may pressure up bullion rates.
In the chart below are the normalized rates of gold and silver between December and February (normalized to 100 as of November 30th). The prices moved in an unclear trend during this week.
Despite the different percent changes of gold and silver, the linear correlation of the two precious metal daily percent changes is still strong and robust, as indicated in the chart below. Nonetheless, the current correlation is at its lowest since July 2012. This means the two metals’ relation has loosened in recent weeks.
Bank of Japan –Monetary Policy Statement: Bank of Japan will come up with its monetary policy for February. In the previous meeting, the BOJ raised the inflation target from 1% to 2% and committed to an asset purchase program with no limit in 2013. The current monetary easing is at over 100 trillion yen. In the previous meeting, BOJ kept the interest rate unchanged at 0 to 0.1 percent. The steps taken by Prime Minster Shinzo Abe to jump start the Japanese economy, might further weaken the yen; if BOJ will continue to expand its monetary policy, this could further drag down the yen;
EU Industrial Production: this report will present the monthly developments in the industrial production as of January; as of December, the production declined by 0.3%; this report may affect the euro/usd;
Italian 10 Year Bond Auction: the Italian government will come up with another bond auction; in the latest bond auction, which was held at the last week of January, the average rate reached 4.17% – the lowest rate in recent months; if the rate will continue to decline, it could suggest that the EU is regaining the confidence of traders;
Governor King speaks: Bank of England’s Governor will give a speech regarding England’s inflation and employment conditions; he may also offer some insight regarding the recent MPC monetary policy meeting, in which the MPC kept the policy unchanged; this speech may influence British Pound traders;
BOE Inflation Report: Bank of England will publish its quarterly update of its estimate for the economic growth and inflation for the next couple of years;
U.S. Retail Sales Report: this report will present the monthly developments in the retail sales and food services for January; in the recent report regarding December, the retail sales increased by 0.5% from the previous month;
U.S 10 Year Bond Auction: the U.S government will issue its monthly bond auction; in the recent bond auction, which was held at the second week of January, the average rate was 1.86% – the highest rate in recent months; if the rate will continue to rise, it could suggest that more traders become more bullish;
Current Gold and Silver Rates as of February 13th
Gold (short term delivery) is traded at $1,647.4 per t oz. a $2or 0.13% decrease as of 09:06*.
Silver (short term delivery) is at $31.03 per t oz – a $0.01 or 0.28% increase as of 09:06*.
Daily Outlook for February 13th
Prices of gold and silver changed course and slightly rose yesterday. Their modest gain may have had to do with the weakening of the USD. But the little movement in gold and silver might continue. The ongoing rise of the U.S long term securities yields is plausibly among the factors holding back the prices of precious metals from rising. Today’s U.S bond auction could also affect indirectly bullion rates. The upcoming Bank of Japan monetary policy meeting might affect not only the Japanese yen but also precious metals prices. The upcoming U.S report regarding retail sales could affect the USD and thus the direction of gold and silver. If the report will show a drop in retail sales, it could pressure up gold and silver rates. Finally, if the Euro and other “risk currencies” will continue to appreciate during the day 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 –EU Industrial Production
Tentative – Italian 10 Year Bond Auction
10:30 –Governor King speaks
Tentative – BOE Inflation Report
13:30 –U.S. Retail Sales Report
18:00 – U.S 10 Year Bond Auction
Tentative – Bank of Japan – Rate Decision and Monetary Policy Statement
9:00 – ECB Monthly Bulletin
10:00 – EU GDP for Q4 2012
13:30 – U.S. Jobless Claims Weekly Report
For further reading:
- Gold and Silver Outlook for February 11-15
- Weekly Outlook Financial Markets for February 11-15
- Gold and Silver Outlook for February
- Gold and Silver Yearly Outlook For 2013