Gold and silver changed direction again and tumbled down along with other commodities such as oil and stock indexes. Further, this fall coincided with the deprecation of the Euro and other “risk currencies” against the USD. Today the FOMC meeting will conclude. The FOMC will issue a statement later this day that could affect precious metals prices. U.S treasuries yields are still increasing and this trend could serve as an indicator for a rise in “risk taking sentiment”. If such a sentiment will continue it could adversely affect not only the demand for U.S treasuries but also bullion. Currently, the prices of gold and silver are increasing. On today’s agenda: FOMC Statement, U.S. New Home Sales, Flash Euro Area Manufacturing PMI, German Business Climate Survey, U.S. Flash Manufacturing PMI, Bank of Canada’s Monetary Policy and Press Conference, ECB President Speaks, and German 10 Year Bond Auction.
Here is a short outlook for precious metals for Wednesday, October 24th:
Precious Metals –October Update
On Tuesday, Gold declined by 0.98% to $1,709; Silver also decreased by 1.42% to $31.79. During the month, gold decreased by 3.64%; silver, by 8.05%.
As seen below, the chart shows the changes of normalized prices of precious metals during September-October (normalized to 100 as of September 13th). During recent weeks, both gold and silver have had a downward trend.
The ratio between the two precious metals rose on Tuesday to 53.77. During the month, the ratio increased by 4.8% as gold slightly out-performed silver.
FOMC Statement – October Meeting
Today will conclude the penultimate FOMC meeting for 2012 (the next meeting will be during December 11-12). Because of the recent FOMC decision to implement quantitative easing 3 and to extend its pledge of low rates to mid-2015, there aren’t high expectations that the Fed will introduce additional expanding monetary steps in this meeting. As seen in the table below, in the past when the FOMC didn’t change its policy the prices of gold and silver declined mainly on the next day.
On Today’s Agenda
ECB President Speaks: Mario Draghi will participate in a closed door meeting at the Deutsche Bundestag, in Berlin. Following last week’s EU Summit that resulted with no big headlines, perhaps in his speech he might refer to the future monetary steps of ECB and the actions that should be taken by the major economies in order to deal with the debt crisis. This speech might affect the Euro to US dollar exchange rate;
Flash German and Euro Area Manufacturing PMI: In the previous report regarding September 2012, the German PMI rose to 47.3 i.e. the manufacturing conditions are still contracting but at a slightly slower rate. This report serves as an indicator to the economic development of the Euro Area’s leading economies’ manufacturing conditions; this news, in turn, may affect the Euro/USD currency pair;
U.S. New Home Sales: in the previous report (for August), the sales of new homes declined to an annual rate of 373,000 – a 0.3% decline (month over month); if the number of home sales will change direction and rise, it may indicate a sign of some recovery in the U.S real estate market which may also affect the strength of the USD;
German Business Climate Survey: In the previous report for September 2012, the business climate index declined from 102.3 in August to 101.4 in September; if this trend will continue, it might adversely affect the Euro;
U.S. Flash Manufacturing PMI: During September 2012 the index rose to 51.5%, which means the manufacturing is expanding; this index may affect forex, crude oil and natural gas markets;
Bank of Canada’s Monetary Policy and Press Conference: The Bank of Canada will come out with 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;
German 10 Year Bond Auction: the German government will issue another bond auction; in the recent bond auction, which was held at the last week of September, the average rate reached 1.52%;
Currencies / Bullion Market – October Update
The Euro/ USD also fell on Tuesday by 0.57% to 1.2986. During the month, the Euro/USD rose by 0.99%. Further, many other currencies such as Aussie dollar and Canadian dollar depreciated against the USD by 0.53% and 0.03%, respectively. The correlation between gold and Euro remains mid-strong and positive: during recent weeks, the linear correlation between the gold and EURO/USD was at 0.56 (daily percent changes); the linear correlation between the gold and USD/ Canadian dollar was -0.51 (daily percent changes). If the Euro will continue to decline against the USD, it is likely to pull down gold and silver.
Current Gold and Silver Rates as of October 24th
Gold (November 2012 delivery) is traded at $1,710.8 per t oz. a $1.4 or 0.08% increase as of 07:51*.
Silver (November 2012 delivery) is at $31.965 per t oz – a $0.172 or 0.54% increase as of 07:51*.
Daily Outlook for October 24th
The prices of precious metals changed direction again and tumbled down on Tuesday. This fall may continue today, especially if related markets including stocks and other commodities will continue their downward trend. The upcoming FOMC statement might result with little effect on the bullion market, especially the FOMC won’t make big announcements. The upcoming U.S reports including manufacturing PMI and new home sales could adversely affect bullion rates if these reports will be positive and exceed expectations. Finally, if the Euro and other “risk currencies” will further to depreciate against the USD, then they are likely to also pull down precious metals.
Here is a reminder of the top events and publications that are scheduled for today and tomorrow (all times GMT):
Tentative – German 10 Year Bond Auction
08:30 – Flash German, French and Euro Area Manufacturing PMI
09:00 – German Business Climate Survey
14:00 – U.S. Flash Manufacturing PMI
15:00 – U.S. New Home Sales
15:30 – Bank of Canada’s Monetary Policy and Press Conference
19:15 – FOMC Meeting (Statement)
00:45 – ECB President Speaks
09:30 – Flash GB GDP Q3 2012
13:30 – U.S Core Durable Goods
13:30 – U.S. Jobless Claims Weekly Report
15:00 – U.S. Pending Home Sales
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