Gold and silver prices fell for the first time in several days, while the S&P500 and other US stock markets sharply inclined yesterday. Currently, gold and silver prices are traded sharply down. Today, the US Report on core Durable Goods will be published.
Let’s examine the precious metals market for today, August 24th:
Gold and silver prices –August
Gold and silver prices changed direction and fell yesterday: Gold price fell on Tuesday by 1.62% to $1,861; silver price also declined by 2.39% to $42.33. During August, gold price increased by 14.1%, and silver price inclined by 5.5%. The chart below shows the normalized gold and silver prices (July 29th 2011=100).
Bloomberg estimates Central banks will retain their gold reserves even if they will need to sell gold and raise cash to payoff their debt, due to their lack of confidence in major currencies. In recent years many central banks have stocked up and bought gold due to concerns of progress in global economy. If this trend will continue, it could further explain the rising demand for gold.
The ratio between gold and silver prices continues to remain around the 44-45 mark, but shows a slight downward trend in recent days; on Tuesday, August 23rd it reached 43.97. During August, gold price has outperformed silver price as the ratio inclined by 8.1%.
S&P500 / Gold & silver prices – August update
The S&P500 index sharply inclined on Tuesday by 3.43%, and thus gained back some of the losses from last week. During August, S&P500 index fell by 10.05%. The linear correlation of gold and silver prices with S&P500 index (daily percent changes) was -0.551 (for gold) and -0.339* (for silver) as of August 23rd. This means, as the S&P500 index rises, gold and silver prices fall. If the S&P500 index will continue to gain back its grounds, it may further curb the rally of gold and silver prices and even push it slightly down.
US Dollar / Gold & silver prices – August update
The Euro to US dollar exchange rate continues to zigzag and inclined yesterday by 0.58%. During August, the Euro to US dollar exchange rate changed directions 14 times (on a daily basis). The US dollar also depreciated against other major currencies including Australian dollar and Canadian dollar. Bloomberg reports that currently US dollar is traded down due to the recent China manufacturing survey that showed a slowdown in China’s manufacturing activity.
US Treasuries / Gold & silver prices – August update
The US 10-year Treasury yields are still very low, but they have inclined from their yearly low of 2.07% on August 19th. During August they have fell by 0.62 percent points.
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 (September 2011 delivery) is traded at $1,781.7 per t oz. a $79.6 or 4.28% decrease as of 16:22*.
Current silver price short term future is at $40.555 per t oz – a $1.775or 4.19% decline as of 16:22*.
The current ratio of gold to silver prices is at 43.91.
Gold and silver prices Outlook:
Gold and silver prices changed direction and fell yesterday. They are currently traded sharply down, which is probably another indication that the recent rally was driven by hot speculative money. The rally of the stock market and the rise in US Treasury bills yields in the past couple of days may indicate that the gold rush is slowing down and might even change direction for the near future just to make a correction to the sharp jump gold had in the past couple of weeks. I don’t think it’s a change in direction and gold and silver prices may continue to rally but at a much slower pace. If the stock markets will continue to incline today it may further curb some of the gains in gold and silver prices.
Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):
13:30 – US Department of Commerce – Report on core Durable Goods
15:30 – EIA report about Crude oil inventories
13:30 – Department of Labor report – U.S. unemployment claims
15:30 – EIA report about Natural gas storage
4.05 – Reserve Bank of Australia – Governor Stevens talks
For further reading:
Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.