Gold and silver prices continued their rally as they have completed a three day rally during last week. The positive news of the expansion of the US employment by 227k didn’t slow down gold and silver prices rally on Friday. Many bullion traders are looking towards tomorrow’s FOMC meeting. The Greek debt crisis will probably continue to be in the news cycle especially after investors agreed to restructure the Greek debt which puts Greece officially in default. Currently gold and silver are traded down. Today the U.S. Federal Budget Balance will come out and BOJ will announce its rate decision.
Here is a short review on gold and silver prices for Monday, March 12th:
Gold and Silver– March Update
Gold price increased on Friday by 0.75% to $1,711.5; silver much like gold also increased by 1.13% to $34.21. During the month, gold remained virtually unchanged while silver declined by 1.24%.
The chart below presents the developments of gold and silver during March (prices are normalized to February 29th).
The ratio between gold and silver slightly declined on Friday, and reached 50.03. During the month the ratio rose by 1.27% as gold has moderately outperformed silver. In the chart below are the developments of this ratio during the last couple of weeks.
U.S. Non-farm Employment Grew by 227k in February
As expected, the U.S. labor force rose again during February by 227,000. The main sectors that increased during the month were in professional and business services, health care, leisure, mining and manufacturing.
The table below presents the correlation between the news of the U.S. labor report and the daily changes in gold and silver prices on the day of publication. It shows that even after Friday’s results the correlation between bullion prices and U.S. employment changes is still strong and negative.
As I have already reviewed in the March gold monthly report, historically, as the non-farm payrolls expanded gold price tended to decline; this correlation was mostly due to the effect this news had on the U.S dollar; the news of the sharp increase in the U.S. labor force may have curbed the rally of gold and silver prices but didn’t turn the rally around. One reason may be that gold traders keep raising their wagers on gold, and thus pushing gold price up in anticipation for tomorrow’s FOMC meeting.
Additional Items on Today’s Agenda
U.S. Federal Budget Balance: this publication will refer to recent shifts in the U.S federal balance for February; this report indicates the government debt growth and thus may affect the U.S dollar. In the last report the deficit increased by only $27 billion – the lowest gain in over two years – to a deficit of $349 billion for the fiscal year of 2012;
Bank of Japan – Rate Decision and Monetary Policy: Bank of Japan will decide on its interest rate and monetary policy. If Bank of Japan will introduce additional monetary stimulus plans, it could affect the direction of the Yen and commodities prices;
Forex / Gold & Silver Market – March
The Euro/U.S Dollar tumbled on Friday by 1.14% to 1.3123. During the month Euro/U.S Dollar decreased by 1.52%; furthermore, the Australian dollar also sharply depreciated against the U.S. dollar by 0.64%. These currencies pairs are historically linearly correlated with the daily percent changes of gold and silver prices; thus the direction of the Euro and Aussie dollar during the day may indirectly affect gold and silver prices. Currently, the Euro/USD is slightly declining.
Current Gold and Silver Prices March 12th
Gold (April 2012 delivery) is traded at $1,704.6 per t oz. a $6.9 or 0.40% decrease as of 09:51*.
Silver (April 2012 delivery) is at $33.95 per t oz – a $0.262 or 0.77% decrease as of 09:51*.
Gold and Silver Daily Outlook
On Friday, gold and silver prices started off the day falling, perhaps due to the positive U.S. labor report and the tumble down of many “risk currencies” such as Euro and Aussie dollar. But then gold and silver changed direction rose and thus completed a three consecutive day rally. This may have been because many Gold traders have been very bullish in recent days.
The upcoming American report and Japan’s rate decision may affect the direction of US dollar and consequently also affect gold and silver prices. But I think the high volume trading will commence tomorrow in anticipation of the upcoming FOMC meeting.
Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):
19:00 –U.S. Federal Budget Balance
Tentative – Bank of Japan – Rate Decision
10:00 –German ZEW economic sentiment
13:30 –U.S. Retail Sales Report
18:15 – FOMC Meeting (Statement)
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