The prices of gold and silver hiked on Tuesday and thus completed a two day rally. The U.S Presidential elections are over as the incumbent President Obama was elected to serve another term in the White House. In the 2007 elections the prices of gold and silver hiked during the week of the elections. Thus, the recent rise in the prices of gold and silver coincides with the bullion market reaction four years ago. The recent rally, however, might change direction, as was the case four years ago, in the days to follow. In other financial news, RBA left its short term interest rate unchanged at 3.25%. Currently, the prices of gold and silver are rising. Besides the results of the Presidential elections, on today’s agenda: Swiss National Bank Foreign Currency Reserve, Euro Area Retail Sales, German Industrial Production, Japan Current Account and Australia Employment Report.
Here is a short outlook for precious metals for Wednesday, November 7th:
Precious Metals –November Update
On Tuesday, Gold hiked by 1.89% to $1,715; Silver also rose by 2.89% to $32.03. During the month, gold declined by 0.24%; silver, by 0.89%.
As seen below, the chart presents the changes in the normalized prices of precious metals during recent weeks (normalized to 100 as of October 18th). During the past couple of days, both gold and silver bounced back from their downward trend.
The ratio between the two precious metals declined again on Tuesday to 53.54. During the month, the ratio rose by 0.65% as gold slightly out-performed silver.
On Today’s Agenda
U.S 10 Year Bond Auction: the U.S government will issue another bond auction; in the recent bond auction, which was held at the second week of October, the average rate reached 1.7%; if the rate will continue to fall, it could suggest that more traders become more bearish;
Japan Current Account: this report will show the changes in the difference between exports and imports for Japan during last month; this news may affect the strength of the Japanese Yen;
Swiss National Bank Foreign Currency Reserve: The Bank will report its current Foreign Currency Reserve; according to the pervious report, the forex reserves rose;
Euro Area Retail Sales: This report will show the recent development in EU retail sales for October. In September, retail sales edged up by 0.1%; if this report will not show growth it might weaken the Euro;
German Industrial Production: in the previous report the German industrial production declined by 0.5% (M-O-M) during August;
Australia Employment Report: in the recent report regarding September 2012 the rate of unemployment increased to 5.4%; the number of employed (seasonally adjusted) slightly rose by 14,500 people; the number of unemployed rose by 38,800 during September compared with August’s numbers. This report could affect the Australian dollar (see here the recent report);
Currencies / Bullion Market – November Update
The Euro/ USD slightly rose again on Tuesday by 0.16% to 1.2815. During the month, the Euro/USD declined by 1.12%. Moreover, many other currencies such as Aussie dollar also depreciated during yesterday against the USD by 0.67%. The decision of RBA to leave its rate unchanged may have contributed to the rally of the Aussie dollar yesterday. As seen in the chart below, the linear correlation between gold and Euro/USD remains mid-strong and robust: during October/November, the linear correlation between gold and Euro /USD reached 0.57 (daily percent changes); the linear correlation between the silver and Euro /USD was 0.5 (daily percent changes). Thus, if the Euro and other risk currencies will continue to rally against the USD, they are likely to positively affect gold and silver.
Current Gold and Silver Rates as of November 7th
Gold (December 2012 delivery) is traded at $1,722.4 per t oz. a $7.4 or 0.43% increase as of 05:45*.
Silver (December 2012 delivery) is at $32.16 per t oz – a $0.13 or 0.39% increase as of 05:45*.
Daily Outlook for November 7th
The prices of bullion rose again on Tuesday. The U.S Presidential elections seem to have a short term substantial effect on the prices of gold and silver. The election of President Obama for a second term, seems to raise the concerns over the potential devalue of the USD and thus pulled up the prices of gold and silver. This market reaction was also the case in 2007. In any case, this recent rally might be short lived and soon after there could be a sharp pull back. The upcoming financial reports to be published today including German Industrial production and EU retail sales could affect the strength of the Euro. The upcoming U.S bond auction could signal the changes in the market sentiment. Finally, if the Euro and other “risk currencies” will continue to rally against the USD, then they are likely to positively affect precious metals prices.
Here is a reminder of the top events and publications that are scheduled for today and tomorrow (all times GMT):
09:00 – Swiss National Bank Foreign Currency Reserve
11:00 – Euro Area Retail Sales
11:00– German Industrial Production
15:30 – U.S Crude Oil Stockpiles Report
19:00 – U.S 10 Year Bond Auction
00:30 – Japan Current Account
02:30 – Australia Employment Report
All Day – Euro-group Meeting
12:00 – Great Britain Bank Rate & Asset Purchase Plan
12:45 – ECB Press Conference and Euro Rate Decision
13:30 –Canadian Trade Balance
13:30 –American Trade Balance
13:30 – U.S. Jobless Claims Weekly Report
01:30 – Reserve Bank of Australia – Monetary Policy Statement
02:30 – China’s CPI
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