Gold and silver prices started off the week rising along with many other commodities prices and major currencies including the Euro. But there is still no clear path for gold and silver prices as both zigzagged from gains to losses on daily basis in the past four business days. Currently the price of gold and silver are falling. There are still widespread strikes of gold jewelers in India because of the recent hike in gold tax that India added recently. This may stir up the gold market until this situation will be resolved. Today, Great Britain CPI will be published, U.S housing starts and building permits and Bernanke will give a speech.
Here is a short outlook on gold and silver prices for Tuesday, March 20th:
Gold and Silver– March Update
Gold price bounced back on Monday and rose by 0.69% to $1,657.3; silver also edged up by 1.08% to $32.96. During March, gold declined by 2.57% and silver by 4.87%.
The chart below shows the downward trend of gold and silver during March (prices are normalized to February 29th).
The ratio between gold and silver didn’t move much and reached 50.59. In the past couple of weeks the ratio ranged between 50 and 51. During the month the ratio rose by 2.42% as silver has moderately underperformed gold. In the chart below is the upward trend of this ratio during the month.
During the past four months there has been a drop in the volatility of gold and silver prices as their standard deviations have declined. Therefore, the prices of bullion are less volatility in the recent months than in earlier stages of 2011. This also means that for the time being the volatility isn’t high so it lowers the chances of another CME intervention.
There were reports that China raised fuel prices again. This may curb its economic growth and in turn may also adversely affect commodities prices including bullion. China is among the leading countries in importing gold.
Investors continue to drop gold producer’s stocks this time Kinross Gold Crop in favor of buying gold and gold ETFs such as SPDR (GLD).
On Today’s Agenda
Great Britain CPI: this report will show the yearly rate of GB’s consumer price index for February 2012; some expect the February inflation will be slightly lower than in recent months; in the recent report regarding January the annual CPI declined from 4.2% to 3.6%; this news may affect the direction of the British pound;
U.S. Housing Starts: this report was historically correlated with the price of gold– as housing starts rose, gold price tended to decline the following day (even when controlling for the U.S dollar effect); in the recent report, the adjusted annual rate rose by 1.5% to 699,000 in January; if this upward trend will continue it may adversely affect precious metals prices (the previous US building permits and housing starts review);
Bernanke Speech: following the FOMC meeting from last week the Chairman of the Fed will give a speech that may affect forex and commodities markets. The title of the speech is “The Federal Reserve and the Financial Crisis” Part 1″;
Forex / Gold & Silver Market – March
The Euro/U.S Dollar also rose on Monday by 0.47% to 1.3238. During March Euro/U.S Dollar decreased by 0.65%; further, the Australian dollar and Canadian dollar also edged up against the U.S. dollar by 0.16% and 0.46%, respectively. Since these exchange rates are historically linearly correlated with the daily percent changes of gold and silver prices if these exchange rates will depreciate against the U.S dollar it may indicate gold and silver will also decline. Currently, the Euro/USD is slightly falling.
Current Gold and Silver Prices March 20th
Gold (April 2012 delivery) is traded at $1,656.4 per t oz. a $10.9 or 0.65% decrease as of 07:28*.
Silver (April 2012 delivery) is at $32.63 per t oz – a $0.325 or 0.99% decrease as of 07:28*.
Daily Outlook and Analysis
Precious metals prices continue to zigzag with no clear trend in the past several business days. This no clear path may continue until the next bombshell. The upcoming U.S reports on the housing market, Bernanke’s speech and Great Britain CPI may affect major currencies pairs including British Pound and U.S dollar and consequently may indirectly affect the prices of gold and silver. I speculate gold and silver prices will continue to follow the developments in the forex markets and may trade down.
Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):
09:30 – Great Britain CPI
13:30 – U.S. Housing Starts
13:30 – U.S. Building Permits
17:45 – Bernanke Speech
09:30 – MPC Meeting Minutes
15:00 – U.S. Existing Home Sales
15:30 – EIA Crude Oil Stockpiles Report
00:50 – Report of Japanese Trade balance
3:30– China flash Manufacturing PMI
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