Gold and silver prices changed direction in July and rose very sharply, after a slow paced movement during June and May. What were the driving forces behind the recent rally of gold and silver prices during July? Much like the sharp rises that were recorded back in April for gold and silver prices, this time this rally also had less to do with the changes in US dollar or major Stock market indexes and had more to do with the uncertainty in the financial markets and the changes in gold holdings. What is up ahead for gold and silver prices in August 2011? Let’s examine the precious metals market for July and try and to provide an outlook for gold and silver prices for August 2011.
Gold and silver prices July 2011
In July silver price started very slowly and it declined on the first day of the month; afterwards silver price started to pick up very slowly and only from July 13th silver price increased very sharply; gold price, on the hand, didn’t fluctuate as silver price did and rose steadily during July.
By the end of the month, the two precious metals rose in July by 8.5% for gold price and 15.1% for silver price. The last time gold and silver prices had such a sharp rally was back in April when they rose during the month by 8.92% and 28.8%, respectively.
The table below divides the month into two parts with the breaking point at July 12th;, notice that during the first part of July, silver price rose by only 2.3%, while gold price rose by 4%; during the second part of July, silver price rose very sharply by 12.5%, and gold price increased by 4.4% – a similar rate as in the first part of July.
During the first part of July, US dollar appreciated against the Euro, Australian dollar and Canadian dollar, in which the two latter currencies are usually strongly correlated with gold and silver prices; during the second part of the month, the US dollar depreciated against these currencies; this shift is consistent with the shift in the silver price’s movement as it rose very sharply from July 12th while the US dollar weakened. This doesn’t explain, however the growth in gold price.
The chart below shows the changes in gold and silver prices during July, in which the prices were normalized to 100 on June 30th 2011.
The chart shows the sharp rises in silver price from July 12th; gold price is steadily rising during the month.
The chart below presents the changes in the ratio of gold price to silver price (gold price/silver price) during July and the beginning of August; the ratio had a downward trend during the first couple of weeks of July, as silver price has outperformed gold price; but during the last week of July the ratio stabilized at the 40-41 mark; at the beginning of August this ratio started to pick up again as gold price outperformed silver price.
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