Gold and silver prices sharply rose yesterday and recorded the sharpest gains during October. Does this mean there is a shift in the recent trend of gold and silver prices from downward to upward? Today, the second (this week) EU summit will be held in Brussels; in the summit there will an attempt to resolve the European debt crisis. Currently gold and silver prices are traded up. The U.S Core Durable Goods report will be published today; also the U.S. New Home Sales report; and BOJ’s Rate will be announced.
Here is a market outlook of precious metals prices for today, October 26th:
Gold and Silver Prices – October Update
Gold price sharply rose on Tuesday by 2.91% to $1,700.4; silver price also sharply inclined by 4.45% to $33.05. These are the highest price levels these metals have reached during the month. The chart below shows the development of gold and silver prices during October (normalized gold and silver prices (September 30th 2011=100)). During October, gold price rose by 4.8% and silver prices by 9.9%.
The ratio between gold and silver prices slipped on Tuesday, October 25th to 51.45. During October, silver price inclined by a slightly larger rate than gold price as the ratio declined by 4.6%.
Euro Summit – Round Two Today
Today, the second of two EU summit will be held (the first one was held back on Sunday). This will be the 14th EU crisis meeting in the past 21 months and will include representatives from all 27 European Union countries.
There are still crucial issues left open including how to boost the EFSF, reducing Greece’s debt burden and recapitalizing European commercial banks.
In regards to the Greek debt there are gaps between the EU leaders and private sectors banks: the former consider there should be at least a 50-60% hair cut on the Greek debt, while the latter offer only a haircut of 40% on the debt.
Merkel will address today the lower house in an attempt to pass the vote to increase the European rescue plan, which currently has 440 billion euros. In the mean time, German two year notes yields continue to fall, while Italy’s 10 year notes yields continue to rise and is currently at 5.89% a 0.38 percent points monthly gain.
Finally, Hedge funds are renewing their bullish bets in raw materials over the expectations that the U.S. economy is showing signs of recovery and the ongoing debacle in the European debt crisis.
On Today’s Agenda:
Bank of Japan – Rate Decision: This statement will present Bank of Japan’s rate decision and other monetary related decisions. In the recent statement the bank left the interest rate at 0 to 0.1 percent;
U.S Core Durable Goods: This report will present the changes in orders of durable goods in the U.S. in the manufacturing sector in September. During August 2011, manufactured durable goods fell by $0.2 billion to $201.8 billion;
U.S. New Home Sales: in the recent report (August 2011), the sales of new homes reached an annual rate of 295,000 – a drop of 2.3%; if this downward trend will continue, it may only further indicate a slowdown in the U.S real estate market;
U.S Dollar / Gold & Silver Prices – October
The Euro to U.S Dollar exchange rate slightly declined on Tuesday by 0.16% to reach 1.3908; other currencies also were traded down against the USD including CAD, and AUD. If the “risk currencies” (i.e. AUD, Euro and CAD) will drop today, they might curb some of gains in gold and silver prices.
U.S. Treasuries / Gold Price – October
The U.S. 10-year Treasury yield changed direction and sharply fell on Tuesday by 0.11 percent points to 2.14%; during October the 10 year treasury yield rose by 0.22 percent point. Yesterday’s shift coincides with the sharp falls in the U.S. stock markets indexes. During previous months, the correlation between gold price and U.S 10 year treasury yield was negative, but during October the relation shifted direction as U.S treasury yields sharp rose. If the recent drop in the yields will continue and won’t be just a correction, it may serve as an indictor a change in market sentiment.
S&P500 / Gold & Silver Prices – October
The S&P500 index also changed direction and declined on Tuesday by 2.00% to reach 1,229.05; during October the S&P500 index added 8.63% to its value. During October the correlation between the U.S. stock market and gold price was negative and weaker compared with previous months’ correlations.
Current Gold and Silver Prices
The precious metals prices are currently traded up in the European markets:
Current gold price short term future (November 2011 delivery) is traded at $1,715.4 per t oz. a $15 or 0.88% increase as of 09:01*.
Current silver price short term future (November 2011 delivery) is at $33.275 per t oz – a $0.223 or 0.67% incline as of 09:02*.
The current ratio of gold to silver prices is at 51.54.
Gold and Silver Prices Outlook:
Gold and silver prices continued their rally and sharply inclined on Tuesday – this was the third straight business day they rose; gold and silver prices continue their rally and are traded up. Today’s EU summit might bring some ease to the financial community if the people involved there will reach an agreement; alas in the more likely scenario there won’t be an agreement, and thus the uncertainty level will remain high. This may help with the ongoing rally of gold and silver prices. Today’s U.S. reports might shed some light on the progress of the U.S. economy and if they will show a slowdown, it could also help push traders towards safe haven investments such as gold, silver and U.S. treasury bills. .
Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):
All day – EU Summit
Tentative – Bank of Japan – Rate Decision
13:30 – U.S Department of Commerce – Report on Core Durable Goods
15:00 – U.S. New Home Sales
15:30 – EIA Report on Crude Oil Stockpiles
09:00 – Monetary Developments in the Euro Area
13:30 – Department of Labor Report – U.S. Unemployment Claim
13:30 – Advanced US GDP 3Q 2011 Report
15:00 – U.S. pending Home Sales
15:30 – EIA report on U.S. Natural Gas Market
For further reading:
- Weekly Outlook for October 24-28
- Did the Liquidity Trap Cause the Hike in Gold Price?
- Gold & Silver Prices | Weekly Recap 17-21 October
Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.