Gold and silver prices kept on rising but at a much slower pace than at the beginning of the month. Silver price changed from red to green in August as it slowly climbed back up from the sharp falls it reordered earlier this month. Gold and silver prices are currently traded sharply up. Today, the U.S. consumer price index will be published; The US unemployment claims and US existing home sales.
Let’s examine the precious metals market for today, August 18th:
Gold and silver prices –August
Gold price inclined on Wednesday by 0.49% to $1,793; silver price also followed and inclined by 1.33% to $40.38.
During August, gold price increased by 10%, and silver price slightly inclined by 0.7%.
The chart below shows the normalized gold and silver prices (July 29th 2011=100). Gold and silver prices are currently on an upward trend with a much gradual slope than in the beginning of the month.
The ratio between gold and silver prices continues to remain around the 44-45 mark; on Wednesday, August 17th it reached 44.43. During August gold price has outperformed silver price as the ratio inclined by 9.2%.
US CPI – July 2011
This report will present the changes in the core consumer price index during July. Following the published PPI for July 2011 (see below), it’s likely that the CPI will also moderately incline. In June 2011 the CPI fell by 0.2% and over the last 12 months by 3.6%.
U.S. unemployment claims
The weekly update on unemployment claims will be publish and serves as a good indicator of the weekly changes in the people outside the U.S. Labor market. For the week ending on August 6th, initial claims decreased by 3,250 to 405,000 claims (4-week moving average), and the number of insured unemployment fell by 15,000 to 3.718 million (4-week moving average). If this decrease will continue it may indicate more people found jobs or gave up looking, but in any case will decrease the rate of unemployment (see here my recent review on the US Labor market).
U.S. existing home sales
Following the decline in US housing starts and building permits as states in the recent U.S. Census Bureau report for July 2011, the report on the U.S. existing home sales might also show a slow down in July. In the June report, the seasonally adjusted annual rate reached 4.77 million home sales compared with an annual rate of 4.81 million home sales in May 2011, a 0.8% drop. This might be another indicator of the economic slowdown in the US.
US Dollar / Gold & silver prices – August update
The Euro to US dollar exchange rate slightly inclined yesterday by 0.12%, despite the disagreement in the recent German-French summit over the debit crisis in Europe; the US dollar slightly depreciated against other currencies including the Australian dollar and Canadian dollar. The high volatility in the forex market that was mainly in the beginning of the month has slightly subsided, but could erupt again very promptly; if the forex markets will resume its high volatility, it could affect gold and silver prices to increase. The Euro to US dollar exchange rate was highly correlated (positive correlation) with gold and silver prices (daily percent changes); this means, during August as the Euro appreciates against the US dollar, gold and silver prices are traded up.
S&P500 / Gold & silver prices – August update
The S&P500 index didn’t change much yesterday as it slightly inclined by 0.09%. During August the linear correlation of gold prices and S&P500 index (daily percent changes) was -0.499 (but due to very few samples, it wasn’t significant). This means, as the S&P500 index decreased, gold prices inclined. If the S&P500 index will continue to fall, it may give some additional backwind to the upward trend of gold prices.
US PPI – rose by 0.2% in July 2011
The producer price index for finished goods inclined by 0.2%, after the PPI fell by 0.4% in June; this index is estimated to have a lagged negative linear correlation with gold prices; i.e. as the PPI rises, gold prices falls the following day. Since gold price is experiencing an upward trend, this news is less likely to shift the direction of gold price, but it might curb its increase.
Current Gold and Silver prices
The precious metals prices are currently traded up in the U.S. markets:
The current gold price short term future (September 2011 delivery) is traded at $1,821.3 per t oz. a $27.5 or 1.53% increase as of 18:18*.
Current silver price, short term futures is at $40.695 per t oz – a $0.317 or 0.79% incline as of 18:17*.
The current ratio of gold to silver prices is at 44.75.
Gold and silver prices Outlook:
Gold and silver prices continue their upward trend but with a gradual slope. The US existing home sales might continue to show a slowdown in the US housing market. This might push up gold and silver prices. On the other hand, the PPI report might curb the rises in gold and silver prices, and perhaps even cause them to fall today. Finally, the disappointing Euro Summit didn’t seem to affect many traders as the Euro didn’t depreciate yesterday.
I still think that gold and silver prices will continue their rally, but with much less volatility than in the beginning of August.
Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):
13:30 – Report on US CPI
13:30 – Department of Labor report – U.S. unemployment claims
15:00 – U.S. existing home sales
15:30 – EIA report about Natural gas storage
13.00 – Canadian Core CPI
For further reading:
Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.