Gold and silver prices slightly declined again on the first day of the week, but currently they are moderately rising. The recent news of the unexpected rise in the German confidence report maybe among the factors to further rally the Euro and thus also precious metals prices. Today, the U.S. Housing Starts and building permits report will be published, the Canadian consumer price index and Bank of Japan announces its monetary policy and rate decision.
Here is a market outlook of precious metals prices for today, December 20th:
Gold and Silver Prices –December Update
Gold price slipped on Monday by 0.08% to $1,596.7; silver price also declined by 2.69% to $28.87. The chart below shows the changes of gold and silver prices during the month (normalized gold and silver prices to November 30th 2011). During December gold price dropped by 8.8% and silver price by 12%.
The ratio between gold and silver prices inclined on Monday, December 19th and reached 55.30. During the month the ratio gained 3.6% as gold price has outperformed silver price.
Despite the sharp decline in gold and silver prices throughout the month, their daily percent changes’ standard deviations didn’t increase compared with their standard deviations in previous months and are well below the high standard deviations recorded back in September when both precious metals prices plummeted precipitately.
Traders Bearish on Gold – Goldman Predicts Rally in Commodities
The sharp declines in commodities prices including gold price was probably due to the sharp reduction in speculators’ bets on commodities; according to Bloomberg, wagers on gold futures declined to an eight week low. That being said, Goldman Sachs is still predicting that 2012 won’t be a recession year and commodities will maintain a 15% return in the upcoming year. This means that while gold price may further decline in the days to come, it may rally in the long run.
On Today’s Agenda
Canadian Core CPI: This report will refer to the core consumer price index changes during November 2011 that controls the volatile components such as energy, fruit and vegetables. According to the Canadian CPI report for October 2011, the CPI rose by 2.9% during the past 12 months. This news could affect the Canadian dollar which is strongly correlated with commodities prices.
U.S. Housing Starts and Building Permits: the US Census Bureau will publish the U.S housing report; the housing starts was historically correlated with gold price – as housing starts declined, gold prices tend to rise the following day (even when controlling to the U.S dollar effect); in the previous report, the adjusted annual rate of housing starts slightly rose by 0.3%, while adjusted annual rate of building permits inclined by 10.9% (M-o-M) (see here the recent review);
Bank of Japan – Rate and Monetary Policy Decision: In the previous statement, the BOJ kept the interest rate unchanged at 0 to 0.1 percent. If the BOJ will prepare additional monetary stimulus plans, it may affect the forex market and commodities markets considering that Japan is among the leading countries in importing commodities such as gold and crude oil;
Forex Trading / Gold & Silver Prices – December Update
The Euro to U.S Dollar moderately slipped on Monday by 0.36% to reach 1.2999. Other forex exchange rates such as the Canadian dollar and Australian dollar also depreciated against the U.S dollar. If these currencies will change direction today and appreciate against the U.S. dollar, then it may affect gold and silver prices to incline.
American Stock Markets / Gold & Silver Prices – Update
The S&P500 index slightly dropped on Monday by 1.17% to 1,205.35. During December S&P500 index declined by 3.34%. The S&P500 index are strongly and positively correlated to gold and silver prices (during December the linear correlation was 0.546 and 0.704, respectively), so that if the stock market will rally from yesterday’s decline, it may also indicate that gold and silver prices are likely to follow and rise.
The chart below presents the development of precious metals prices and &P500 index during December (they are all normalized to November 30th). It shows that S&P500 index declined during the month but by a a lesser rate than gold and silver prices.
Current Gold and Silver Prices December 20th
The major precious metals are currently traded slightly up in the European markets:
Current gold price per ounce short term future (January 2012 delivery) is traded at $1,602.80 per t oz. a $6.1 or 0.38% increase as of 08:17*.
Current silver price per ounce short term future (January 2012 delivery) is at $29.110 per t oz – a $0.236 or 0.82% increase as of 08:16*.
(* GMT)
Gold and Silver Prices Outlook:
Gold and silver prices didn’t do much yesterday, but many anticipate that the precious metals will rally from the sharp declines of last week and curb some of the falls of December. The upcoming reports of the housing market in the U.S. may affect gold price to rally if the reports won’t show an improvement. In the meantime, if the Stocks and Forex markets will rally today, this may also positively affect precious metals prices to rise.
Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):
Today
13:00 – Canadian Core CPI
13:30 – U.S. Housing Starts
13:30 – U.S. Building Permits
Tentative – Bank of Japan – Rate Decision
Tomorrow
13:30 – Core Retails Sales Canada (October 2011)
15:00 – U.S. Existing Home Sales
15:30 – EIA Crude Oil Market 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.