Gold and silver prices changed direction several times yesterday but eventually didn’t do much and only slightly changed. The recent FOMC meeting didn’t bring much news as there were no announcements of a new stimulus plan. The market didn’t react well to this news as the Euro and gold price declined yesterday. Today, the EU industrial Production report will be published, the USD Import Prices, and China’s manufacturing PMI. There is also the semi annual OPEC meeting that could affect energy commodities prices and indirectly may also influence precious metals prices. Currently gold and silver are traded sharply down. The last time gold and silver prices declined so sharply was back in September 23rd when the CME raised the margins on gold and silver.
Here is a market outlook of precious metals prices for today, December 14th:
Gold and Silver Prices –December Update
Gold price declined on Tuesday by 0.31% to $1,663.1; silver price on the other hand inclined by 0.83% to $31.26. The chart below shows the development of gold and silver prices in December (normalized gold and silver prices to November 30th 2011). During December gold price decreased by 5.0% and silver price by 4.7%.
Despite the different directions of gold price and silver price in recent days, their daily percent changes correlations during December are still high and very similar to the linear correlation recorded in November.
As I have expected, in yesterday’s Federal Open Market Committee meeting, the Committee decided to keep its current monetary policy and didn’t introduce a new stimulus plan such as quantitative easing plan three.
The FOMC stated in its statement that the U.S is showing some signs of improvements in the labor market despite the still high unemployment rate. The Committee also still estimates the U.S. economy will grow at a slow pace (in the third quarter the U.S. GDP grew by 2% (Q-o-Q)) in the quarters to come.
This news of no QE3 for the time being may have been among the factors to drag down the precious metals prices yesterday (at least gold price) and may continue to trade down throughout the day.
Forex Trading / Gold & Silver Prices – December Update
The Euro to U.S Dollar sharply declined again yesterday by 1.14% to reach 1.3037. Other forex exchange rates such as the Australian dollar also depreciated against the US dollar. The recent decline in the forex markets probably affected gold and silver prices to decline. If the Euro and AUD will continue to depreciate against the US dollar, they may also further help gold and silver prices to decline.
American Stock Markets / Gold & Silver Prices – Update
The S&P500 index slipped yesterday along with the rest of the American stock markets; on Tuesday the S&P500 index declined by 0.87% to 1,225.73 – the lowest level since November 29th. The S&P500 index and gold and silver prices are strongly and positively correlated during December (as seen in the chart below), so that if the stock market will continue to decline during the day, it may also indicate that gold and silver prices are likely to follow and decrease.
The U.S. 10-year Treasury yield slipped on Tuesday by 0.07 percent points to 1.96% – the lowest level since November 22nd; during December the 10 year treasury yield dropped by 0.12 percent point. Furthermore, during December there were positive correlations among the daily percent changes of U.S. 10 year notes yields and gold and silver prices (0.078 and 0.421, respectively). If the long term U.S. treasury yields will continue to decrease, it may also continue to pressure down gold and silver prices. The chart below shows the development of gold price vs. the U.S. 10 year notes yield during December.
The major precious metals are currently traded sharply down in the American markets:
Current gold price per ounce short term future (January 2012 delivery) is traded at $1,578.80 per t oz. a $84.3 or 5.07% decrease as of 19:04*.
Current silver price per ounce short term future (January 2012 delivery) is at $28.68 per t oz – a $2.58 or 8.25% decrease as of 19:05*.
Gold and Silver Prices Outlook:
Gold and silver prices moderately changed yesterday, but they continue their downward trend they have had during most of December. The effect of the recent FOMC meeting that didn’t bring a new stimulus plan may continue to linger during the day and may adversely affect not only the Euro and AUD trading, but also (and consequently) the gold and silver trading.
Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):
10:00 – EU industrial Production
13:30 – USD Import Prices
All Day –OPEC Meeting
15:30 – EIA Crude Oil Market Report
02:30 – HSBC report on China’s manufacturing PMI (flash)
08:30 – Libor Rate of Swiss National Bank
09:00 – Euro Area Manufacturing PMI
11:25 – ECB President Speaks
13:30 – U.S. Producer Price Index
13:30 – Department of Labor Report – U.S. Unemployment Claims
14:00 – U.S. TIC Long Term Purchases
15:00 – Philly Fed Manufacturing Index
15:30 – EIA U.S. Natural Gas Report
For further reading:
Monthly Analysis and Outlook:
- Gold and Silver Prices Monthly Outlook for December 2011
- Natural Gas Prices Monthly Outlook for December 2011
About the Author: Lior Cohen, M.A in Economics, a commodities analyst and blogger at Trading NRG.