Gold and silver prices recorded additional sharp gains yesterday following the European Union agreement on debt reduction for Greece; the news of the U.S GDP growth in Q3 may have also helped push commodities prices up as the confidence in the markets grew. Currently gold and silver prices are traded with moderate changes. Today, U.S. Employment Cost Index will be published and U.S. Personal Income and Outlays report.
Here is a market outlook of precious metals prices for today, October 28th:
Gold and Silver Prices – October Update
Gold price rose on Thursday by 1.40% to $1,747.7; silver price also sharply inclined by 5.41% to $35.11. These are the highest price levels these metals have reached in October. The chart below presents the development of gold and silver prices during October (normalized gold and silver prices (September 30th 2011=100)). During October, gold price increased by 7.7% and silver prices by 16.7%.
The ratio between gold and silver prices sharply fell on Thursday, October 27th to 49.78. During October, silver price inclined by a slightly larger rate than gold price as the ratio slipped by 7.7%.
US GDP Grew by 2.5% in Q3 2011
As reported yesterday, the growth rate of the real U.S GDP 2011 in the third quarter of 2011 was 2.5%. This news probably helped rally not only the American stock market (see below) but also major commodities such as crude oil and gold.
Euro Summit –Cutting the Greek and Debt and Boost EFSF
The EU Summit ended 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 increase should ease the pressure in the financial community and ease the concerns revolving the European debt crisis.
This news seems to have helped boost the confidence levels of commodities, stocks and forex traders to help rally these markets yesterday.
On Today’s Agenda:
U.S. Employment Cost Index: This report will show the changes in the compensation costs for civilian workers during the past three months (see here the last report);
U.S. Personal Income and Outlays (September 2011): This report will present the monthly changes in the personal spending and income in September (see here the recent report);
U.S Dollar / Gold & Silver Prices – October
The Euro to U.S Dollar exchange rate sharply increased yesterday by 2.04% to reach 1.4189; other currencies also were traded sharply up against the USD including CAD, and AUD. It seems that the effect of the sharp gains in the “risk currencies” (i.e. AUD, Euro and CAD) was strong in helping push gold and silver prices up. The chart below shows the strong correlations among the gold and silver prices daily percent changes in the daily percent changes of major exchange rates. If said currencies will continue their rally today they might add to the gains in gold and silver prices.
S&P500 / Gold & Silver Prices – October
The S&P500 index sharply rose on Thursday by 3.43% to reach 1,284.00; yesterday was also the highest trade volume for the S&P500 since September 22nd, 2011; during October the S&P500 index added 13.54% to its value. During October the correlation between the S&P500 index and gold price was weak, which means that, as oppose to previous months, the relation between gold price and S&P500 index is less significant during October than it was in previous months.
U.S. Treasuries / Gold Price – October
The U.S. 10-year Treasury yield sharply rose on Thursday by 0.19 percent points to 2.42% – the highest rate level since August 5th, 2011; during October the 10 year treasury yield rose by 0.50 percent point. Yesterday’s shift coincides with the huge gains 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. The rise in the yields is likely to be an indicator that the market confidence is rising so that traders starting to feel more confidence is taking risk.
Current Gold and Silver Prices
The precious metals prices are currently traded with mixed trend in the European markets:
Current gold price short term future (November 2011 delivery) is traded at $1,740.0 per t oz. a $7.7 or 0.44% decrease as of 09:17*.
Current silver price short term future (November 2011 delivery) is at $35.300 per t oz – a $0.188 or 0.54% incline as of 09:18*.
The current ratio of gold to silver prices is at 49.29.
(* GMT)
Gold and Silver Prices Outlook:
Gold and silver prices continued their rally as they have rose throughout the week at spectacular rates; The EU summit agreement didn’t curb the gains in the gold and silver prices and actually continued the rally via the depreciation of the USD: the news of the EU summit sharply affected the forex market so that the Euro, AUD and CAD sharply appreciated against the USD resulting in gains to gold and silver prices. The news of the increase in the growth rate in U.S’s GDP in the third quarter may have helped rally major commodities such as crude oil and gold. Following the sharp gains, there might not be much excitement today as there was yesterday so that there could even be a correction for gold and silver prices after their upward trend in recent days.
Here is a reminder of the top events and reports that are planed for today (all times GMT):
Today
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.