Gold and silver prices started off the week with moderate falls as the US Treasury bill yields fell and the S&P500 index inclined. Currently, gold and silver prices are traded up. Today, the U.S. consumer confidence report will be published and the minutes of the last FOMC meeting.
Let’s examine the precious metals market for today, August 30th:
Gold and silver prices –August
Gold and silver prices started the week with moderate falls: Gold price fell on Monday by 0.32% to $1,791; silver price also declined by 0.98% to $40.60. During August, gold price increased by 9.8%, and silver price by 1.2%. The chart below shows the development of the normalized gold and silver prices (July 29th 2011=100) during August.
The ratio between gold and silver prices keeps on dwindling around 43-45; on Monday, August 29th it reached 44.13. During August, gold price has outperformed silver price as the ratio inclined by 8.5%.
Bloomberg reports that gold demand in India – the biggest importer of gold worldwide, may surge by 25% during its festival season – a time when Indians purchase gold jewelry, coins and bars. If this news will prove to have merit it could help in gold price’s rally in the weeks to come.
On Today’s Agenda
Minutes of FOMC: In the recent FOMC meeting it was decided to keep the US interest rates low until mid-2013. This ruling wasn’t taken unanimously among FOMC members. The minutes might provide some further insight on this decision and may also suggest what could be up ahead in regards to implementing any further stimulus plans;
US consumer confidence report: The current expectations are that the August consumer confidence index may show a further decline; this news may affect commodities traders including in the gold and silver market.
S&P500 / Gold & silver prices – August update
The S&P500 index inclined again for the second straight business day by 2.83%, and thus completed an 8.09% rally since August 8th – the lowest price level in 2011. During August, S&P500 index fell by 6.36%. Furthermore, during August the S&P500 index had a negative correlation with the daily percent changes of gold and silver prices of -0.446 and -0.364, respectively; so that if the S&P500 index will further incline today, it may further curb some of the gains in gold and silver prices.
US Treasuries / Gold & silver prices – August update
The US 10-year Treasury yields changed direction and sharply inclined yesterday by 0.09 percent points, but during August they have fell by 0.54 percent points. If the demand for U.S. Treasury bills will drop and the yields will further rise, it may further indicate that traders are pulling away from safe haven financial instruments including gold and silver, and thus gold and silver prices may slip again.
US Dollar / Gold & silver prices – August update
The Euro to US dollar exchange rate slightly inclined on Monday by 0.08%, and completed a two day rally; this fact should be noted, considering that during August, the Euro to US dollar exchange rate changed directions 16 times (on a daily basis). The US dollar appreciated against other major currencies including Australian dollar and Canadian dollar. Because of the high volatility in the Forex market, it’s still hard to see the effect of the changes in US dollar on gold and silver prices.
Current Gold and Silver prices
The precious metals prices are currently traded up in the U.S. markets:
Current gold price short term future (September 2011 delivery) is traded at $1,826.9 per t oz. a $35.3 or 1.97% increase as of 18:50*.
Current silver price short term future is at $41.335 per t oz – a $0.734 or 1.81% incline as of 18:51*.
The current ratio of gold to silver prices is at 44.19.
Gold and silver prices Outlook:
Gold and silver prices slightly fell yesterday, after they have rallied in the previous few days. The uncertainly in the financial markets is still high so gold and silver prices may change direction again and rise. The movement in the stock market and the bonds market may also contribute to the changes in the gold and silver prices throughout the day. I still speculate that gold and silver prices will continue to rally at a slower pace than during the second week of August.
Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):
15.00 – US consumer confidence
17:30 – FOMC meeting minutes
10.00 – Euro Area rate of unemployment
10.00 – Euro Area annual inflation (July)
13.30 – ADP estimate of U.S. change in non-farm employment
13:30 – Canada GDP by industry
15:30 – EIA report about Crude oil inventories
2.00– China Manufacturing PMI
For further reading:
- The fall and rise of gold & silver | weekly recap 22-26 August
- Weekly Outlook for August 29- 2 September
Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.