Gold and silver prices didn’t do much yesterday but this may change today. The statement of the recent FOMC meeting will be released. Furthermore, the FOMC projection on the U.S economy will also be published. The release of these reports will be followed with a press conference. These events may have a substantial effect on the bullion market as was the case in the previous FOMC meeting. Let’s examine the situation and determine how the FOMC may affect the precious metals market during today’s trading (UPDATE: as expected, FOMC didn’t vote on another QE program and maintained policy unchanged; one member even voted against the majority in his projection that rates will not remain low until late 2014).
Currently gold and silver prices are only slightly decreasing. It seems that the market got use to the FOMC not delivering and keeping the policy unchanged.
Additional items on today’s agenda include: U.K GDP for Q1 2012, U.S core durable goods report, ECB President Draghi speaks.
Here is a short analysis and projection of gold and silver prices for Wednesday, April 25th:
Gold and Silver– April Update
Gold price bounced back on Tuesday by 0.69% to $1,643.8; silver much like gold increased by 0.71% to $30.82. During April, gold decreased by 1.68% and silver by 5.14%.
The chart below presents the developments of both metals during recent weeks (gold and silver are normalized to 100 as of March 30th).
The ratio between gold and silver nearly didn’t change at 53.34. During April the ratio increased by 3.64% as gold has outperformed silver during the month mainly yesterday. In the chart below are the changes in this ratio during April (up to date).
Statement of recent FOMC meeting: I think the FOMC won’t decide on another stimulus plan, especially since the U.S’s economic progress is still moving up (e.g. the U.S labor market and U.S GDP are still growing); the FOMC statement may affect the strength of US dollar and more than that it will affect gold and silver prices;
FOMC Economic Projection: this report is updated every quarter and includes the FOMC’s projection on U.S economic growth and inflation in 2012 and 2013. This projection could affect the US dollar;
ECB President Draghi Speaks: Following the April ECB rate decision in which the rate wasn’t changed at 1% President Draghi will speak and may refer to ECB’s plan to calm the markets including implementing LTRO 3 or resuming the SMP. His speech may influence the direction of the Euro/USD;
U.S Core Durable Goods: According to previous report for February 2012, new orders of manufactured durable goods rose by $4.5 billion; if this report will continue to be positive then it may strengthen the US dollar; this report might slightly affect gold oil and silver prices (the FOMC statement will probably overshadow this report);
Forex / Gold & Silver Market – April
The Euro/U.S Dollar also rallied on Tuesday by 0.31% to 1.3197. During April Euro/U.S Dollar decreased by 1.1%; furthermore, the “risk currencies” which tend to be correlated with precious metals prices including the Canadian dollar also appreciated against the U.S. dollar by 0.42%. The recent disappointing U.S consumer confidence report and U.S home sales may have had something to do with the depreciation of the U.S dollar during yesterday. If the U.S dollar will change direction and appreciate against these exchange rates especially if the FOMC won’t come up with another QE program, this may signal gold and silver will tumble.
Current Gold and Silver Prices as of April 25th
Gold (May 2012 delivery) is traded at $1,639 per t oz. a $4.8 or 0.29% decrease as of 17:24*.
Silver (May 2012 delivery) is at $30.305 per t oz – a $0.51 or 1.66% decrease as of 17:25*.
Daily Outlook and Analysis for April 25th
Gold and silver prices continued to zigzag with an unclear trend yesterday, as they both have done in recent weeks. This may change today. The upcoming statement of the recent FOMC meeting and the Fed’s economic projection of the U.S may have a substantial effect on the U.S dollar and bullion prices. Since the last FOMC meeting in March, there were several U.S reports that showed some signs of slowdown, most notably the recent non-farm payroll report, in which the labor force grew by only 120k. So the U.S economy might be slowing down. The upcoming GDP report (to be published on Friday) will shed some additional light on this issue but for now I think there isn’t enough for the Fed to come up with another stimulus plan. Therefore if the FOMC won’t come up with another plan or won’t hint of another stimulus plan in the near horizon and the economic projection won’t be too bad then I speculate gold and silver prices will sharply decline during today’s trading.
Here is a reminder of the top events and reports that are planned for today and tomorrow (all times GMT):
08:00 – ECB President Draghi Speaks
09:30 – Great Britain GDP Q1 2012
13:30 – U.S Core Durable Goods
15:30 – U.S Crude Oil Stockpiles Report
17:30 – FOMC Meeting (Statement)
19:00 – FOMC Economic Projection
19:15 – FOMC Press Conference – Bernanke Speaks
13:30 – U.S. Department of Labor– Jobless Claims Weekly Update
Tentative – Italian 10 year bond Auction
15:00 – U.S. Pending Home Sales
15:30 – EIA U.S. Natural Gas Storage Report
Tentative – Bank of Japan –Monetary Policy Statement
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