Gold and silver prices declined for the third consecutive day. There are still speculations around the possibility of Greek default, which could come into effect on Thursday. But due to the LTRO, EU banks have more than enough funds to offset any losses from a possible Greek default. Thus the markets might not stir up tomorrow as many have anticipated. This Greek news however may be partially responsible to the recent decline in Euro and bullion prices. As in the flash report, the Euro Area GDP declined by 0.3% in the last quarter of 2011 according to yesterday’s report. This news may have been among the contributing factors to the fall of major stock indexes, commodities prices and many currencies such as the Euro. Australia’s GDP in Q4 2011 also didn’t present big numbers as it has expanded by only 0.4% (seasonally adjusted, Q-o-Q) compared with a growth rate of 1.0% in annual terms (seasonally adjusted) in Q3 2011.
The downward trend of precious metals continues especially after Bernanke’s testimony from last week which for many signaled no QE3 in the upcoming FOMC meeting. Currently gold and silver prices are slightly rising. Today the German Factory orders monthly update will be published and ADP estimate of U.S. non-farm payroll for February.
Here is a short review on gold and silver prices for Wednesday, March 7th:
Gold and Silver– March Update
Gold price sharply fell on Tuesday by 1.87% to $1,672.1 – the lowest price level since January 24th; silver even more than gold decreased by 2.71% to $32.78. During the month, gold declined by 2.29% and silver by 5.37%.
The chart below shows the downward trend of gold and silver during the last couple of weeks (prices are normalized to February 23rd).
The ratio between gold and silver rose on Tuesday, and reached 51.01. During the month the ratio rose by 3.25% as gold has moderately outperformed silver. In the chart below are the developments in this ratio during the last few weeks.
Despite the different daily percent changes of gold price and silver price in recent days, the linear correlation of their daily percent changes is still strong and robust as seen in the chart below.
On today’s agenda
German Factory orders: this report will show the changes in the Germany factory orders during February; this news may indicate the development of the German Economy and consequently may affect the direction of Euro and precious metals prices;
ADP estimate of U.S. non-farm payroll: ADP will estimate the U.S employment development during the month of February 2012 in anticipation for the upcoming no-farm report to be published on Friday;
Forex / Gold & Silver Market – March
The Euro/U.S Dollar sharply declined on Tuesday by 0.80% to 1.3111. During the month Euro/U.S Dollar decreased by 1.61%; furthermore, the Australian dollar and Canadian dollar also sharply depreciated against the U.S. dollar by 1.1% and 0.73%, respectively. These currencies pairs are historically linked with the developments of gold and silver prices, even though in recent weeks their linear correlation have weakened; if the Euro and Australian dollar will bounce back and rise during the day; it may indicate gold and silver prices will also trade up. Currently, the Euro/USD is slightly rising.
Current Gold and Silver Prices March 7th
Gold (April 2012 delivery) is traded at $1,675.4 per t oz. a $3.3 or 0.20% increase as of 06:33*.
Silver (April 2012 delivery) is at $32.905 per t oz – a $0.122 or 0.37% increase as of 06:32*.
(* GMT)
Gold and Silver Daily Estimate
Yesterday, gold and silver prices continued their downward trend of the past couple of weeks. The possibility of another stimulus plan in the U.S. is low at least for the next few weeks. In the meantime, the further decline in Europe’s economy pulls down its currency and drags along with it other currencies such as the Aussie dollar and consequently gold and silver prices. After three consecutive days of falls, gold and silver prices might bounce back as a corrective measure to their tumble. Especially if the German factory orders will rise it could further push up a bit the Euro along with metals. If ADP will estimate another big month for the U.S. labor market it could curb the metals prices rally.
Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):
Today
12:00 – German Factory orders
13:15 – ADP estimate of U.S. non-farm payroll
15:30 – EIA Crude Oil Stockpiles Report
Tomorrow
12:45 – ECB Press Conference and Euro Rate Decision
13:30 – Department of Labor Report – U.S. Unemployment Claims
15:30 – EIA U.S. Natural Gas Market Report
2:30 – Australian Trade Balance
3:30 – Chinese CPI
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