Gold and silver prices sharply fell yesterday as the speculations around the Euro debt crisis shifted direction from pessimism to light optimism; the recent talks are that Italian officials have held talks with Chinese delegates regarding investing in the country. This may have been among the factors to pull the US stock markets up and consequently trade down gold and silver ; the appreciation of the USD against the AUD may have also contributed to the falls of bullion prices. Today, the US Federal Budget balance report will be published, the US import prices and the Australian housing starts. Let’s examine the precious metals market for today, September 13th:
Gold and silver prices –September
Gold and silver prices started the week falling: Gold price declined on Monday by 2.48% to $1,813; silver price also declined by 3.38% to $40.22. During September, gold price slightly declined by 1.0% while silver price fell by 3.7%. The chart below (normalized gold and silver prices (August 31st 2011=100)) shows the price development of precious metals in recent weeks.
The ratio between gold and silver prices continues to hover around 43-45; on Monday, September 12th the ratio slightly rose to 45.09. During September, gold price has slightly outperformed silver price as the ratio inclined by 2.8%.
On Today’s Agenda:
US Federal Budget Balance: this report will present the changes in the US federal balance for August 2011; this report indicates the government debt growth and thus may affect the USD and consequently gold and silver trading.
US Dollar / Gold & silver prices – September update
The Euro to USD changed direction yesterday and climbed 0.16% to 1.3679; during September the EURO/USD rate fell by 4.8%. The depreciation of US dollar against the Euro may have curbed the falls in gold and silver prices. The US dollar also depreciated on Monday against other major currencies that are correlated with gold and silver prices such as CAD. But the AUD/USD exchange rate fell yesterday by 1.17%. This exchange rate used to be highly correlated with gold and silver prices in recent months and could be linked to the recent decline in the bullion market.
US Treasuries / Gold & silver prices – September update
The US 10-year Treasury yields slightly climbed yesterday by 0.01 percent points to 1.94%; during September they have fallen by 0.29 percent points. Bloomberg reported on the drop in the 10-year T-bills yield as the demand for safe havens have eased over the speculation that China may purchase European bonds. But the demand for US short term bonds is still robust:
“The U.S. government sold $32 billion of three-year securities at a record low yield in the first of three note and bond offerings this week totaling $66 billion.”
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 -0.862 and -0.496, respectively.
S&P500 / Gold & silver prices – September update
The S&P500 index changed direction and slightly inclined yesterday by 0.70%. During September, S&P500 index fell by 4.65%. During September the S&P500 index had negative correlations with the daily percent changes of gold and silver prices of -0.811 and -0.317, respectively. If the stock market will continue to rise, it may further affect gold and silver prices to trade down.
Current Gold and Silver prices
The precious metals prices are currently traded slightly up in the European markets:
Current gold price short term future (October 2011 delivery) is traded at $1,833.5 per t oz. a $20.2 or 1.11% increase as of 07:44*.
Current silver price short term future is at $40.940 per t oz – a $0.723 or 1.80% incline as of 07:43*.
The current ratio of gold to silver prices is at 44.78.
Gold and silver prices Outlook:
Gold and silver prices continue to zigzag with no clear direction in the past several days as the speculation around the Euro debit crisis runs high. The slight rise in US stock markets the moderate fall in US Treasury yields and the appreciation of the USD against the AUD may have caused gold and silver prices to trade down yesterday. But a new day brings new events and the direction of the US stock market along with the USD against major currencies could further affect gold and silver prices. Following such a sharp fall in gold and silver prices yesterday, there may be a correction today. During the remainder 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):
13:30 – US import prices (m-2-m)
19:00 –US Federal Budget Balance
2:30 – Australian housing starts (Q-2-Q)
10:00 – Euro Area CPI and core monthly inflation (August)
13.30 – U.S. producer price index
15:30 – Changes in US retail sales
15:30 – EIA report about Crude oil inventories
For further reading:
Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.