Gold and silver prices continued to rise yesterday and thus completed a fourth business day rally. The European Union leaders reached an agreement on the debt crisis that could ease the concerns of the financial community and thus curb the recent rally in gold and silver prices. Currently gold and silver prices are traded sharply up along with other commodities. Today, U.S Q3 2011 GDP growth rate will be published; Euro Area Monetary Developments report, U.S. Unemployment Claim and U.S. pending Home Sales.
Here is a market outlook of precious metals prices for today, October 27th:
Gold and Silver Prices – October Update
Gold price inclined on Wednesday by 1.36% to $1,723.5; silver price also rose by 0.78% to $33.31. These are the highest price levels these metals have reached during October. 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 increased by 6.2% and silver prices by 10.7%.
The ratio between gold and silver prices slightly inclined on Wednesday, October 26th to 51.74. During October, silver price inclined by a slightly larger rate than gold price as the ratio fell by 4.1%.
Gold and silver prices continue to move in the same direction as their linear correlation remains during October high and positive.
Euro Summit –Cutting the Greek and Debt and Boost EFSF
The EU Summit ended yesterday with several key resolutions including: cutting the Greek debt by 50%; boosting the EFSF (the European rescue fund) from 440 billion euros to 1 trillion euros. This boost should reduce the pressure in the financial community and ease the concerns revolving the European debt crisis.
This news might boost the EU financial markets, ease some of the concerns of commodities and forex traders and thus curb the recent rally in gold and silver prices.
BOJ Increased its Monetary Easing Plan
Bank of Japan announced it will boost its Monetary Easing Plan by augmenting the asset purchasing plan by 5 trillion yen ($66 billion) to 55 trillion yen ($726 billion).
This decision was made in order to deal with the ongoing European debt crisis and the concerns of the BOJ of the ramifications of this crisis on Japan’s economy. This program might further weaken the Yen against the USD and might also affect gold and silver traders.
On Today’s Agenda:
Advanced U.S GDP 3Q 2011: This will be the first estimate of the third quarter 2011 real GDP growth rate of U.S. This news could have substantial effect on forex and commodities traders (for the final estimate of 2Q GDP).
Euro Area Monetary Developments: This monthly report will present the changes in the M3, M1 and loans to private sector in the Euro area during September 2011. In the previous report, the growth rate for M3 and M1 sharply inclined. If the M1 and M3 will continue to rise they could serve as another indicator of an expected rise in Euro Area CPI and may affect ECB’s next rate decision;
U.S. Unemployment Claims: initial claims declined by 6,000 to 403,000 claims for the week ending on October 15th; the number of insured unemployment reached 3.719 million, an increase of 25,000 during the week of October 8th;
U.S. pending Home Sales: This report shows the major changes in pending home sales in the U.S. for September 2011; in August report there was decrease in the pending home sales index. This will be another indicator for the economic progress of the real estate market in the US;
U.S Dollar / Gold & Silver Prices – October
The Euro to U.S Dollar exchange rate slightly slipped on Wednesday by 0.01% to reach 1.3906; other currencies also were traded down against the USD including GBP, and AUD. If the “risk currencies” (i.e. AUD, Euro and CAD) will rise today following the news of the EU summit resolutions, they might add to the gains in gold and silver prices.
S&P500 / Gold & Silver Prices – October
The S&P500 index changed direction again and inclined on Wednesday by 1.05% to reach 1,242.00; during October the S&P500 index added 9.77% to its value. During October the correlation between the S&P500 index and gold price was weak and negative compared with previous months’ correlations, while the correlation between silver price and S&P500 index was weak but positive.
Current Gold and Silver Prices
The precious metals prices are currently traded sharply up in the U.S markets:
Current gold price short term future (November 2011 delivery) is traded at $1,744.3 per t oz. a $20.8 or 1.21% increase as of 18:04*.
Current silver price short term future (November 2011 delivery) is at $35.22 per t oz – a $1.91 or 5.73% incline as of 18:04*.
The current ratio of gold to silver prices is at 49.51.
Gold and Silver Prices Outlook:
Gold and silver prices inclined again on Wednesday – this was the fourth straight business day they rose; Yesterday’s EU summit agreement on the Greek debt and EFSF boost may curb the recent gains in the gold and silver prices and may even reverse the increases. But if the Euro and other currencies will trade up against the USD this could positively affect gold and silver prices to rise. The upcoming U.S. reports mainly the GDP growth rate for Q3 2011 will probably also affect commodities traders and may curb the recent rally in the U.S stock markets if the GDP report will present moderate growth. If the growth rate will be higher than in Q2 2011 this might boost the markets and consequently curb the recent rally in gold and silver prices.
Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):
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
13:30 – U.S. Employment Cost Index
13:30 – U.S. Personal Income and Outlays (September 2011)
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.