The prices of precious metals changed direction and bounced back yesterday. This rally coincided with the recent rally of risk related currencies such the Euro, Aussie dollar and Canadian dollar against USD. Today, the FOMC will conclude its two day deliberations and come out with its decision on monetary policy. Will the Fed surprise again? Currently, gold and silver are trading up. Besides the FOMC statement, on today’s agenda: First U.S GDP 4Q 2012 Estimate (update: US GDP fell by 0.1% in Q4), KOF Economic Barometer, Flash Spanish GDP Q4 2012, Italian 10 Year Bond Auction, ADP estimate of U.S. non-farm payroll.
Here is a short outlook for precious metals for Wednesday, January 30th:
Precious Metals – January Update
On Tuesday, the price of gold rose by 0.48% to $1,660.8; Silver price also increased by 1.31% to $31.16. During the month, gold decreased by 0.84%; silver rose by 3.27%.
As seen below, the chart presents the changes in the normalized prices of bullion in January (normalized to 100 as of December 31st). During recent days, the prices of silver and gold have had an unclear trend.
The ratio between the two precious metals fell on Tuesday to 53.3. During January the ratio declined by 3.97% as gold slightly under-performed silver.
The gold and silver futures volumes of trade have increased in recent days: by Tuesday the gold and silver volume reached 281 thousand and 35 thousand, respectively. The gold volume was higher than the volume on the same day last week. If the volume will remain high today, this could suggest the precious metals market is heating up again. The chart below shows the volume of trading gold and silver futures in the CME during the month.
On Today’s Agenda
FOMC Meeting: The FOMC will announce its decision on its monetary policy and interest rate; in December’s FOMC meeting, the FOMC expanded its QE3 program so that the Fed is currently purchasing $40 billion worth of mortgage backed sectaries and $45 billion worth of long term secretaries. The current expectations are that the Fed will maintain its current policy. The currently low inflation rate and slow recovery in the jobs market is likely to keep this expanding monetary policy in the near future. At the same the Fed’s discussion around its exit strategy could raise the speculations in the precious metals markets. If the Fed will refer to this exit plan, it could pull down precious metals prices. The table below shows the decisions of the FOMC in 2012 and the precious metals market reaction on the day of the announcement and the following day.
First U.S GDP 4Q 2012 Estimate: In the previous estimate the U.S GDP during the third quarter expanded by 2.7%; in the 2Q2012 the GDP growth rate reached 1.7% (annual rate). This shows a rise in the growth rate for the US’s GDP. If there will be a sharp change in the growth rate from Q2 to Q3 this could affect not only the US dollar but also precious metals.
ADP estimate of U.S. non-farm payroll: ADP will come out with its estimate for the U.S non-farm payroll change for January 2013 to be published on Friday;
KOF Economic Barometer: this report provides an estimate to the Swiss economy in the future;
Flash Spanish GDP Q4 2012: This report will show the first estimate of the quarterly growth rate of the Spain’s economy during the fourth quarter of 2012; during the third quarter the Spanish economy contracted by 0.3% (Q-2-Q);
Italian 10 Year Bond Auction: the Italian government will have another monthly bond auction; in the latest bond auction, which was held during the last week of December, the average rate reached 4.48% – a slightly higher rate than in the previous auction;
Currencies / Bullion Market – January Update
The Euro/ USD increased on Tuesday by 0.27% to 1.3492. During the month, the Euro/USD increased by 2.27%. Moreover, some currencies such as Aussie dollar and Canadian dollar appreciated yesterday against the USD by 0.55% and 0.53%, respectively. The recent appreciation of these “risk currencies” may have contributed to the recent rally of 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 -0.28 (daily percent changes); the linear correlation between the gold and AUD /USD reached 0.45 (daily percent changes). If these “risk currencies” will continue to appreciate against the USD, they might positively affect gold and silver.
Current Gold and Silver Rates as of January 30th
Gold (short term delivery) is traded at $1,669.1 per t oz. a $6.5 or 0.39% increase as of 07:26*.
Silver (short term delivery) is at $31.44 per t oz – a $0.25 or 0.8% increase as of 07:26*.
(* GMT)
Daily Outlook for January 30th
Prices of precious metals bounced back and rose yesterday. The main event of the week will be the FOMC press conference and announcement of monetary policy. Many expect the Fed won’t stir up the boat and keep its current policy unchanged. If the Fed will refer to its future plans of the when and how to exit from its current QE program, this could pull down precious metals. The upcoming U.S reports including GDP and first estimate on the non-farm payroll changes could affect not only the USD but also precious metals. If the U.S economy will rise, this could pull down bullion rates. Finally, if the Euro and other “risk currencies” will rally against the USD, they might pull up affect bullion.
Here is a reminder of the top events and publications that are scheduled for today and tomorrow (all times GMT):
Today
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
Tomorrow
08:00 – German Retail Sales
08:55 – German unemployment Change
13:30 – Canada’s GDP by Industry
13:30 – U.S Personal Spending
13:30 – U.S. Jobless Claims Weekly Report
02:00 – China Manufacturing PMI
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