Gold and silver prices ended the week with gold price slightly rising and silver price falling; the USD sharply appreciated against the Euro, AUD and CAD, while the US stock markets sharply declined. Currently gold and silver prices are traded down. The concerns over a Greek debt default seem to be one of the prime factors in pulling not only the Euro currency but also major commodities prices down. It seems that President Obama’s speech on Thursday regarding his $447 billion job creating plan didn’t ease the concerns of traders; Bernanke’s speech on that day about the economic outlook of the US also didn’t ease the financial markets. This week there are many news items that could affect traders including the US PPI, US Federal Budget Balance, and Philly Fed Manufacturing Index. Today, the Australian trade balance report will be published.
Let’s examine the precious metals market for the first day of the week, September 12th:
Gold and silver prices –September
Gold and silver prices finished the week with mixed trends: Gold price slightly inclined on Friday by 0.11% to $1,859; silver price on the other hand declined by 2.13% to $41.62. During September, gold price slightly inclined by 1.5% while silver price fell by 0.3%. The chart below (normalized gold and silver prices (August 31st 2011=100)) shows the price development of precious metals in recent weeks. The chart shows the many shifts of gold and silver prices throughout the month.
The ratio between gold and silver prices continues to hover around 43-44; on Friday, September 9th the ratio slightly rose to 44.67. During September, gold price has slightly outperformed silver price as the ratio inclined by 1.9%.
Will there be a Greek default?
One of the main questions that are asked in recent days is whether the Greeks default on their debt. The speculation around this issue continues to run high. There are those who speculate that Germany is already getting ready for a 50pc haircut on Greek debt. In the mean time, these concerns are driving the Euro down along with other currencies and consequently pull gold and silver prices down as well. If the speculations around the threat of a Greek default will continue, it may further affect gold and silver prices to trade down in the short run, until this issue will be resolved or confirmed.
U.S. Trade Balance – decrease in deficit
According to the recent report regarding July the goods deficit decreased by $6.4 billion compared with June 2011 and reached $60.6 billion; the service surplus rose by $0.4 billion to $15.8 billion; as a result, the goods and services deficit decreased during the month by $6.8 billion to $44.8 billion; this news probably helped push EURO/USD down and consequently also major commodities prices.
On Today’s Agenda:
Australian trade balance report: this report will show the changes in the seasonally adjusted balance of goods and services during July. It could offer some insight to the changes in export of non-monetary gold and suggest the changes in demand for non-monetary gold that could explain the changes in gold prices
US Dollar / Gold & silver prices – September update
The Euro to USD continued to free-fall and ended the week with a 1.63% decrease; during September the EURO/USD rate fell by 5.0%. The appreciation of US dollar against the Euro may have curbed the rise in gold prices on Friday. The US dollar also sharply appreciated on Friday against other major currencies that are correlated with gold and silver prices such as AUD and CAD. If this appreciation of the USD will continue, it may further pull down gold and silver prices.
US Treasuries / Gold & silver prices – September update
The US 10-year Treasury yields resumed their downward trend and fell on Friday by 0.07 0.05 percent points; during September they have fallen by 0.30 percent points. This means the demand for U.S. Treasury bills is still growing as their yields falling. During September (up to date) the linear correlations between daily changes in US 10-year Treasury yield and gold and silver prices daily percent changes were -0.846 and -0.399, respectively. If the yields will continue to fall, it may indicate that the demand for safe havens is still robust.
S&P500 / Gold & silver prices – September update
The S&P500 index fell on the last day of the week by 2.67%. During September, S&P500 index lost 5.30% of its value. During September the S&P500 index had negative correlations with the daily percent changes of gold and silver prices of -0.796 and -0.200, respectively. If the stock market will continue to lose ground, it may further affect gold and silver prices to trade up.
Current Gold and Silver prices
The precious metals prices are currently traded up in the U.S. markets:
Current gold price short term future (October 2011 delivery) is traded at $1,806.7 per t oz. a $52.8 or 2.84% decrease as of 19:27*.
Current silver price short term future is at $40.055 per t oz – a $1.569 or 3.77% decline as of 19:28*.
The current ratio of gold to silver prices is at 45.105.
Gold and silver prices Outlook:
Gold and silver prices changed direction several times during September as the falls in the US stock markets and the US Treasury yields may have driven gold and silver prices up while the appreciation of the USD pulls bullion prices down. If the USD will continue to appreciate against the EURO and CAD it may further affect gold and silver to trade down. On the other hand, if the US stock market will trade down, it may curb some of the falls in gold and silver prices throughout the day. During the rest of September, I still speculate gold and silver prices will continue to rise at a slow pace.
Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):
2:30 – Australian trade of Balance
9:00 – FOMC Member Mr. Richard Fisher Speaks
13:30 – US import prices (m-2-m)
19:00 –US Federal Budget Balance
2:30 – Australian housing starts (Q-2-Q)
For further reading:
Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.