Gold and silver prices ended the week with sharp gains; during yesterday they have also increased as major stock markets in Asia and Europe were traded down. Due to the long weekend in the US (Labor Day) there were no trading yesterday , but current expectations are that there will be falls in US stock markets as there were yesterday in other stock markets. If this trend will continue today it will likely to provide back-wind for gold and silver price to further rise. There are reports of growing demand in India and China for gold. Today, the US non-ISM manufacturing PMI report will be published; bank of Japan will decide its rate and publish a monetary policy statement; Australian GDP for Q2 2011 will also be published, and finally Reserve Bank of Australia will decide on its cash rate.
Let’s examine the precious metals market for today, September 6th:
Gold and silver prices –September
Gold and silver prices finished the week with sharp rises: Gold price inclined on Friday by 2.61% to $1,876; silver price also inclined by 3.70% to $43.07. During September, gold price increased by 2.5%, and silver price by 3.1%. The chart below (normalized gold and silver prices (August 16th 2011=100)) shows the price development of precious metals in the past couple of weeks. It shows the rise and fall of precious metals’ prices up to August 24th; afterwards there has been a moderate upward trend.
The ratio between gold and silver prices remained around 43-45; on Friday, September 2nd the ratio slightly fell to 43.58. During September, silver price has slightly outperformed gold price as the ratio declined by 0.6%.
US Labor report – no jobs were added in August
The recent US employment report didn’t show any improvement as there were no jobs added during August. This news helped push gold and silver prices up while the stock markets were traded down.
On Today’s Agenda:
ISM Non-Manufacturing PMI: This report could serve as another indicator to the economic progress of the US, as it shows the changes of non-manufacturing sector during August 2011; a disappointing report might pull down the US stock market and thus push up gold and silver prices.
Japan’s rate decision and monetary policy report: In the last statement the bank kept the interest rate unchanged at 0 to 0.1 percent. The recent announcement of BOJ to expand its stimulus plan from 10 trillion yen ($130 billion) to 15 trillion yen ($194 billion) is likely to further weaken the yen against major currencies including US dollar. Japan is among the leading countries in importing commodities such as gold.
S&P500 / Gold & silver prices – September update
The S&P500 index declined in the past couple of business days. During September, S&P500 index fell by 3.69%. This drop was stem, in part from the disappointing US labor report. Furthermore, during August- September the S&P500 index had negative correlations with the daily percent changes of gold and silver prices; so that if the S&P500 index will further declined today, as major stock markets did on Monday, it may further push gold and silver prices up throughout the day.
US Treasuries / Gold & silver prices – September update
The US 10-year Treasury yields ended the week with sharp falls of 0.13 percent points; during September they have fallen by 0.21 percent points. If the demand for U.S. Treasury bills will continue to rise and the yields will further decrease, it may further indicate people are seeking safe havens instruments.
US Dollar / Gold & silver prices – September update
The Euro to US dollar exchange rate declined again for the fourth straight business day, on Friday by 0.38%; this ongoing appreciation of US dollar against the Euro might have curbed some of the gains in gold and silver prices in recent days. The US dollar also appreciated against other major currencies including Australian dollar and Canadian dollar.
Current Gold and Silver prices
The precious metals prices are currently traded with mixed trends in the European markets:
Current gold price short term future (October 2011 delivery) is traded at $1,910.2 per t oz. a $33.3 or 1.77% increase as of 09:49*.
Current silver price short term future is at $42.810 per t oz – a $0.259 or 0.60% decline as of 09:47*.
The current ratio of gold to silver prices is at 44.62.
Gold and silver prices Outlook:
Gold and silver prices had an upward trend in recent weeks as the concerns over the debt crisis in Europe rises; the recent news form this front is that Germany may not participate in the bonds bailout. The dissipating US labor report also didn’t help ease the speculations around the economic slowdown of the US, and whether the Fed will issue another stimulus plan. If the US stock markets will trade down and the long term US Treasury bills yields will drop, then these events are likely to indicate a trade up in gold prices. Silver price is likely to follow in gold’s foot steps and incline as well. Therefore, I still think 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):
15:00 – U.S. ISM Non-Manufacturing PMI
Tentative – Bank of Japan – rate decision and monetary policy statement
2.30 – Australian GDP second quarter 2011
5:30 – Reserve Bank of Australia – cash rate decision statement
14.00 – Canada overnight rate
15:30 – EIA report about Crude oil inventories
2:30 – Australia rate of unemployment
For further reading:
Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.