Gold and silver prices ended the week falling as major currencies such as Euro and Australian dollar depreciated against the US dollar. The debate over the budget cuts in the U.S. will continue to occupy the news and may even affect the trading. Today the Euro Area Monetary Development report will be published and the U.S New Home Sales. Currently, gold and silver prices are traded up.
Here is a market outlook of precious metals prices for the first day of the week, November 28th:
Gold and Silver Prices – November Update
Gold price slightly declined on Friday by 0.61% to $1,688.5; silver price also sharply fell by 2.73% to $31.09. In the chart below, gold and silver prices had downward trend during the past couple of weeks (normalized gold and silver prices to November 10th 2011). Due to recent falls, gold price declined by 2.1% during November and silver price by 9.5%.
The ratio between gold and silver prices slightly rose on Tuesday, November 25th to 54.31. During November, gold price fell by a lower rate than silver price so that the ratio rose by 8.1%.
Following the low sales of German bonds and the growing concerns for the stability of France, the leader of Germany and France will meet during the week and try to reach an agreement on budget cuts among European countries that will come into effect starting 2012. This is another attempt to stabilize the Euro Area. The flight of many traders from the Euro currency may also adversely affect gold and silver prices as the US dollar gets stronger.
U.S. Budget Cuts – the Debate Progress
Following the failure of U.S. Super-committee to reach an agreement on the Federal budget cuts, the next step is the “trigger mechanism” that will automatically cut $1.2 trillion from the U.S. budget over the next decade from across all the different sections in the budget including defense. The Republicans will try to block this “trigger mechanism”, but President Obama already stated he will veto any attempt to undo this “trigger mechanism” and will make sure that the $1.2 trillion will be reduced from the budget. This news will probably continue stirring up the financial markets and may influence stocks and commodities traders.
On Today’s Agenda
Euro Area M1 and M3 development: In the last report, the annual growth rate for M3 and M1 sharply rose while the annual growth rate of loans to private sector remained unchanged. If the M1 and M3 will continue to rise in October it could serve as another indicator of an expected rise in Euro Area inflation and may affect ECB’s upcoming interest rate decision (see here the last report);
U.S. New Home Sales: in the previous report (September 2011), the sales of new homes fell by 5.7%; if this downward trend will continue, it may further indicate a slowdown in the U.S real estate market and may also affect gold and silver prices;
S&P500 / Gold & Silver Prices – November
The S&P500 index slightly fell on Friday by 0.27% to 1,158.67. The S&P500 index and gold and silver prices have had a strong and positive relation during the month so far, so that if the stock market will continue to fall, it may also indicate that gold and silver prices are likely to decrease. Currently however the American stock markets are traded up following Black Friday and major commodities prices such as gold and silver prices are also rising.
Forex Trading / Gold & Silver Prices – November
The Euro to U.S Dollar exchange rate sharply fell in the last couple of business days and reached 1.329 by Friday. Other forex currencies also depreciated against the US dollar including the Australian dollar. The positive correlations among the daily percent changes of gold price, silver price and forex exchange rates such as AUD/USD, Euro/USD may continue playing a role in the direction of gold and silver prices and the US dollar strengthens, the bullion prices are likely to fall.
Current Gold and Silver Prices
The precious metals prices are currently traded up in the Asian markets:
Current gold price per ounce short term future (December 2011 delivery) is traded at $1,709.30 per t oz. a $20.8 or 1.23% increase as of 06:04*.
Current silver price per ounce short term future (December 2011 delivery) is at $31.780 per t oz – a $0.688 or 2.21% incline as of 06:03*.
Gold and Silver Prices Outlook:
Despite the downward trend of gold and silver prices in the past couple of weeks, they didn’t do much during last week. If the US dollar will continue to strengthen against major currencies, and the U.S stock markets will tend to fall (even though they currently rising), gold and silver prices are likely to follow and decline. The U.S. budget cuts talks may also affect gold and silver as they did during last week.
Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):
09:00 – Monetary Developments in the Euro Area
15:00 – U.S. New Home Sales
15:00 – U.S Consumer Confidence
For further reading: