Gold and silver prices rallied on Wednesday following the FOMC’s pledge to keep the low interest rates until late 2014. This news also reignited the speculation around whether the Fed will issue another stimulus plan in the near future. Currently, gold and silver are traded moderately up. Today, the U.S. core durable goods report will be published, U.S. weekly update on unemployment claims, and U.S. new home sales report.
Here is a market outlook of metals prices for today, January 26th:
Gold and Silver Prices –January Update
Gold price sharply rose on Wednesday by 2.31% and reached $1,703.0; silver price also sharply increased by 3.58% and reached $33.12. During January, gold price rose by 8.7% and silver price by 18.65%.
The chart below presents the changes of the normalized prices of gold and silver (gold and silver prices are normalized to December 30th) during the month.
The FOMC announced yesterday it will keep the low interest rates low at least until late 2014; this announcement comes despite some signs of recovery in the U.S. economy including the recent gains in the U.S. labor market, and the growth of the U.S. economy in 2011. The FOMC voiced its concern vis-à-vis the slow growth in business fixed investment and in the housing sector.
Since the U.S. inflation remains stable, the FOMC felt comfortable to make this pledge.
Gold and silver prices sharply rose yesterday after the news of this pledge and probably due to the renewed speculation of Bernanke issuing another stimulus plan in the months to come.
On Today’s Agenda
U.S. Unemployment Claims: initial claims decreased by 50,000 to 352,000 claims for the week ending on January 14th; the upcoming weekly report may affect forex and metals markets;
U.S Core Durable Goods: This monthly report will examine the changes in U.S. orders of durable goods in the manufacturing sector during December. This report may indirectly present the changes in U.S. demand for commodities such as crude oil. During November 2011, manufactured durable goods sharply rose by $7.5 billion to $207.0 billion; Non-defense new orders for capital goods also gained $5.9 billion to reach $78.7 billion (for the full report);
U.S. New Home Sales: in the last report (November), the sales of new homes rose by 1.6% to 315,000; if this upward trend will continue, it may further indicate a moderate increase in the U.S real estate market and may also affect metals prices.
Forex Market / Gold & Silver Market – January
The Euro/U.S Dollar slightly rose yesterday by 0.54% to reach 1.3106; the FOMC’s decision may have helped to pull down the U.S. dollar against other currencies; if this trend in which the Euro and Australian dollar, two currencies that are strongly and positively correlated with gold and silver prices (see chart below) will continue it could indicate that precious metals prices will also keep their rally. Currently, the Euro/USD is moderately rising.
Gold price per ounce (February 2012 delivery) is traded at $1,710.0 per t oz. a $7 or 0.41% increase as of 08:26*.
Silver price per ounce (February 2012 delivery) is at $33.135 per t oz – a $0.014 or 0.04% increase as of 08:26*.
Gold and Silver Prices Forecast
Gold and silver prices sharply rose yesterday, with coincides with their general upward tend of recent weeks. The FOMC decision to keep rates low until late 2014 and the reignited speculation of another stimulus plan will probably keep the upward trend of gold and silver prices. I speculate that eventually the Fed won’t issue another QE plan. Tomorrow’s US GDP report will help in assessing this bet. In the meantime the upcoming U.S. reports including unemployment claims, core durable goods and news home sales report may affect forex markets and consequently bullion market if they will show dramatic changes. I speculate gold and silver prices will keep their upward trend.
Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):
13:30 – U.S. Unemployment Claims
13:30 – U.S Core Durable Goods Report
15:00 – U.S. New Home Sales
15:30 –U.S. Natural Gas Market Report
09:00 – Euro Area Monetary Development
10:30 – KOF Economic Barometer
13:30 –U.S GDP 4Q 2011 Estimate
For further reading:
- Why is Gold More Expensive than Platinum?
- Weekly Outlook for 23-27 January
- Gold and Silver Prices Weekly Outlook for January 23-27
- Gold and Silver Prices Outlook for January 2012
About the Author: Lior Cohen, M.A in Economics, a commodities analyst and blogger at Trading NRG.