The prices of precious metals inched up on Tuesday along with other commodities such as oil and risk related currencies such as Canadian dollar and Aussie dollar. According to Standard Bank the demand for gold has risen in recent weeks to its highest level since November 2012. India raised import duties on gold imports from 4% to 6%. How will this news affect the direction of gold and silver? Currently, gold and silver prices are edging down. On today’s agenda: China flash Manufacturing PMI, Bank of Canada’s Overnight Rate, Bank of Canada’s Monetary Policy and Press Conference, Minutes of MPC Meeting.
Here is a short outlook for precious metals for Wednesday, January 23rd:
Precious Metals – January Update
On Tuesday, the price of gold rose by 0.37% to $1,693.2; Silver price also rose by 0.77% to $32.17. During the month, gold increased by 1.1%; silver, by 6.6%.
As seen below, the chart shows the developments in the normalized prices of precious metals during the month (normalized to 100 as of December 31st). During recent weeks, the prices of silver and gold have rallied from their decline at the beginning of January.
The ratio between the two precious metals slipped on Tuesday to 52.64. During January the ratio declined by 5.17% as gold under-performed silver.
The gold and silver futures volumes of trade have risen on Tuesday to 200 thousand and 50 thousand, respectively. These numbers are higher than the volume traded on Friday. If the volume will remain high today, this could suggest the possibility of sudden sharp change in the prices of gold and silver due to low volume will fall. The chart below shows the volume of trading gold and silver futures in the CME during the month.
On Today’s Agenda
Minutes of MPC Meeting: in the previous MPC meeting, the Bank kept the rate flat at 0.5% and the asset purchase program at £375 billion; the MPC still has concerns regarding GB’s inflation rate. The minutes of the latest meeting might offer some insight behind this decision;
Bank of Canada’s Overnight Rate: The Bank of Canada will publish its decision on the short term overnight interest rate, which is currently at 1%. The BOC may continue its policy and keep the interest rate at 1%; on the other hand, the recent slowdown in Canada’s economy might prompt BOC to cut the rate;
Bank of Canada’s Monetary Policy: The Bank of Canada will publish its monetary policy report and also hold up a press conference; if there will be big headlines in this press conference it could affect the Canadian dollar;
China flash Manufacturing PMI: this index will cover 800 companies in 20 industries in China; based on the HSBC Manufacturing PMI report regarding December 2012 the Manufacturing PMI inched up to 50.9; this index indicates the developments in China’s manufacturing sectors growth rate; if the index will further increase, this may positively affect precious metals prices;
Currencies / Bullion Market – January Update
The Euro/ USD edged up on Tuesday by 0.07% to 1.3322. During the month, the Euro/USD rose by 0.98%. Moreover, some currencies such as Aussie dollar also slightly appreciated on Tuesday against the USD by 0.47%. The recent rise of “risk currencies” may have slightly contributed to the modest rise in precious metals prices. Nonetheless, the correlations among gold, Euro and Aussie remained weaker than in 2012: during January, the linear correlation between gold and Euro /USD reached 0.07 (daily percent changes); the linear correlation between the gold and AUD /USD was 0.367 (daily percent changes). These weak correlations might suggest the movements of gold and silver have had a weak relation to the developments in the foreign exchange markets. But if the Euro and other risk currencies will change direction and depreciate against the USD, they are might pull down gold and silver.
Current Gold and Silver Rates as of January 23rd
Gold (short term delivery) is traded at $1,690.5 per t oz. a $2.7 or 0.16% decrease as of 08:33*.
Silver (short term delivery) is at $32.12 per t oz – a $0.06or 0.18% decrease as of 08:33*.
(* GMT)
Daily Outlook for January 23rd
Prices of precious metals have slightly increased yesterday and this low volatility is likely to continue in the days to come. The recent decision of the Indian government to raise taxes on gold imports a couple of days ago is likely to curb the demand from India – the leading importer of gold in 2011. The future talks around steps U.S policymakers will take to tackle the debt ceiling and the spending cuts issues might influence precious metals traders in the coming weeks. The upcoming China flash Manufacturing PMI could affect not only the forex markets but also precious metals. If the PMI will rise again, it could signal a rise in the manufacturing sectors in China and consequently may positively affect commodities prices including gold and silver. If BOC will decide to change its short term rate, it could affect the Canadian dollar, which is still correlated with precious metals. Finally, if the Euro and other “risk currencies” will change direction and decline against the USD, they might adversely affect precious metals.
Here is a reminder of the top events and publications that are scheduled for today and tomorrow (all times GMT):
Today
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
Tomorrow
08:00 – Spain’s unemployment Change
08:30 – Flash German, French and Euro Zone Manufacturing PMI
13:30 – U.S. Jobless Claims Weekly Report
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