The stock markets bounced back from the sharp falls they had recorded on Monday; this shift didn’t stop from gold price to continue its rally and break new highs. Silver price changed direction and sharply fell. The FOMC kept the US basic interest rate unchanged. Today, the Australian unemployment report will be published.
Let’s examine the precious metals market for today, August 10th:
Gold and silver prices –August
Gold price increased again yesterday by 1.74% to new high of $1,743; silver price on the other hand declined by 3.80% to $37.88.
During August, gold price increased by 6.9%, but silver price fell by 5.5%.
The chart below shows the normalized gold and silver prices (July 29th 2011=100). As seen below, gold price continued to incline very sharply during most of the August so far; on the other hand, silver price seems to have taken a different direction and fell very sharply.
The gold to silver ratio: the ratio between gold and silver prices kept on rising in the last few days up to 46.01 on Tuesday, August 9th. The last time the ratio reached such a level was back in February 4th. During August gold price has outperformed silver price as the ratio inclined by 13.1%.
The change in direction of silver price is also seen in the correlation between gold price and silver price. As seem below, the correlation between these precious metal’s prices have fallen during August compared to the previous months.
Federal Reserve kept rate unchanged
Yesterday the Federal Reserve decided to keep the basic interest rate unchanged. The FOMC expects the US economy to experience a slow paced recovery, the unemployment rate will decline only gradually, but at least the US inflation rate is expected to settle as energy commodities prices have came down. The FOMC didn’t elaborate or hinted of any QE3 in the near future. This news might have stabilized the financial markets, but it didn’t reassure the bullion traders as gold prices continue to trade up.
US Dollar / Gold & silver prices – August update
The Euro to US dollar exchange rate sharply inclined on Tuesday by 1.4%; the US dollar sharply depreciated against other currencies including the Australian dollar and Canadian dollar. This backwind also probably helped gold prices to trade up. If the US dollar will continue to depreciate during the day, this might continue to push gold and silver prices to trade up.
Current Gold and Silver prices
The precious metals prices are currently traded sharply up in the US market:
The current gold price short term future (September 2011 delivery) is traded at $1,787.1 per t oz. a $44.1 or 2.53% increase as of 17:35*.
Current silver price, short term futures is at $39.115 per t oz – a $1.232 or 3.25%, incline as of 17:35*.
The current ratio of gold to silver prices is at 45.68.
Gold and silver prices Outlook:
Gold price continues to trade up in August mainly due to the high uncertainty in the financial markets stem from the downgrade of US credit rating by S&P over the weekend. The Federal Reserve decisions to keep rates low all through mid 2013 along with its economic outlook of US’s slow recovery are likely to push gold price further up. On the other hand, silver price isn’t rising as gold price is, but this trend is likely to change and silver price will eventually catch up with gold price’s rally. There are many speculations behind this turn of events about silver’s fall, but none of them seem to provide a good enough explanation. In any case, the sharp changes in gold and silver prices are likely to dissipate in the next few days and then gold and silver prices will stabilize and resume their slow upward trend.
Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):
Tentative –IEA monthly oil report
15:30 – EIA report about Crude oil inventories
2:30 – Australia rate of unemployment
9.00 – ECB monthly bulletin
13.30 – Report on American Trade balance
13.30 –Canadian Trade balance
13:30 – Department of Labor report – U.S. unemployment claims
15:30 – EIA report about Natural gas storage
For further reading:
Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.