Gold and silver prices started the week with light falls, despite yesterday’s decline in the US stock markets. Currently, gold and silver prices are traded down as the US stock markets are rising. Yesterday’s losses were probably related, in part to the appreciation of the US dollar. The US non-ISM manufacturing PMI report showed an improvement in August, and President Obama will seek from Congress $300b for a job expanding program. Today, the Australian unemployment report will be published, and Canada overnight rate decision.
Let’s examine the precious metals market for today, September 7th:
Gold and silver prices –September
Gold and silver prices finished yesterday with moderate falls: Gold price slightly fell on Tuesday by 0.19% to $1,873; silver price also declined by 2.79% to $41.87. During September, gold price increased by 2.3%, and silver price by only 0.2%. 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.
The ratio between gold and silver prices remained around 43-45; on Tuesday, September 6th the ratio slightly rose to 44.74. During September, gold price has slightly outperformed silver price as the ratio inclined by 2.0%.
ISM Non-Manufacturing PMI index slightly inclined in August
The U.S. non-manufacturing PMI index grew for the 21st consecutive month, and slightly inclined from 52.7% in July to 53.3% in August. This encouraging report may have curbed some of the falls in the stock markets, lowered a bit the pessimism in the financial markets in regards to the US economy.
Obama seek $300 billion job expansions program
President Obama said yesterday he plans to address Congress and ask for an approval of a $300 billion job creating program via tax cuts, infrastructure building and aids to local governments. This program will be set to 2012. This stimulus plan is following the disappointing US labor report of August in which there were no jobs added to the economy. It’s not clear yet, even if this program will be approved (and it’s a big if), will it help jumpstart a $15 trillion economy.
On Today’s Agenda:
Canada overnight rate: The BOC may keep the rate unchanged, despite the slight increase in inflation rate to 2.7% (in annul terms). This decision could affect the CAD/USD; there are strong correlations among the Canadian dollar and major commodities that export including gold;
US Dollar / Gold & silver prices – September update
The Euro to US dollar exchange rate declined again for the fifth straight business day, yesterday by a very sharp rate of 1.46%; this ongoing appreciation of US dollar against the Euro might have affected the trade on gold and silver and may have caused gold and silver prices to trade down yesterday. The US dollar also sharply appreciated yesterday against other major currencies including Australian dollar and Canadian dollar.
US Treasuries / Gold & silver prices – September update
The US 10-year Treasury yields slightly fell yesterday by 0.04 percent points; during September they have fallen by 0.25 percent points. This means that there is still growing demand for U.S. Treasury bills as their yields further decrease; therefore, despite yesterday’s fall in gold and silver prices, this may indicate that traders continue seeking safe havens.
S&P500 / Gold & silver prices – September update
The S&P500 index slightly fell yesterday by 0.74%. During September, S&P500 index fell by 4.4%. 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, it may curb some of the falls in gold and silver prices throughout the day.
Current Gold and Silver prices
The precious metals prices are currently traded sharply down in the U.S. markets:
Current gold price short term future (October 2011 delivery) is traded at $1,811.7 per t oz. a $61.6 or 3.29% decrease as of 14:33*.
Current silver price short term future is at $40.685 per t oz – a $1.183 or 2.83% decline as of 14:33*.
The current ratio of gold to silver prices is at 44.53.
Gold and silver prices Outlook:
Gold and silver prices suffered a trim yesterday, and they are currently also being traded down, These falls aren’t consistent with the decline in US Treasury bills or the decline in US stock markets; it could well be the persistent and sharp appreciation of US dollar against major currencies. It could also be a technical correction to the recent sharp gains in the past few days in gold and silver prices. There may be additional correction throughout the day and the rest of the week, but all in all 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):
14.00 – Canada overnight rate
15:30 – EIA report about Crude oil inventories
2:30 – Australia rate of unemployment
13.30 – Canada building permits
13.30 – Report on American Trade balance
13.30 –Canadian Trade balance
13:30 – ECB conference Trichet speaks and Euro rate decision
13:30 – Department of Labor report – U.S. unemployment claims
15:30 – EIA report about Natural gas storage
3.00 – Chinese CPI
For further reading:
Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.