Gold price continued its decline and finished yesterday in the red while silver price remained virtually unchanged. Currently gold and silver prices are traded down. Today, U.S. Consumer Price Index will be published; the U.S. building permits and housing starts report as well.
Here is a market outlook of precious metals prices for today, October 19th:
Gold and Silver Prices – October Update
Gold price sharply declined on Tuesday by 1.42% to $1,652.8; silver price on the other slightly inclined by 0.03% to $31.83. The chart below shows the recent changes in gold and silver prices during the month (normalized gold and silver prices (September 30th 2011=100)). During October, gold price inclined by 1.9%, and silver prices by 5.8%.
The ratio between gold and silver prices sharply fell on Tuesday, October 18th to 51.92. During October, silver price inclined by a slightly larger rate than gold price as the ratio decreased by 3.7%.
Despite the change in direction in which gold and silver prices moved in different direction their relation is still robust with a strong and positive correlation as indicated below.
On Today’s Agenda:
U.S CPI: This monthly report will show the main changes in the consumer price index during September. According to the US Bureau of Labor statistics for August 2011, the CPI inclined by 0.4% and over the last 12 months by 3.8%. The core CPI inclined in August by 0.2%;
U.S. Building Permits & Housing Starts Report: The recent report showed an improvement in the building permits during August 2011, while the adjusted annual rate for housing starts fell during the month; the last parameter was historically correlated with gold price – as housing starts declined, gold prices tend to rise the following day (see here the recent review);
Update on European Debt Crisis – Spain’s Rating Cut
The recent news from Europe is that Moody’s, on the leading rating agencies, announced yesterday it will cut Spain’s rating by two levels from Aa2 to A1. This is the third time in two years that Moody’s reduced Spain’s credit rating. This news didn’t come much as a surprise to the markets as the European and American stock markets continued to rise yesterday (see below).
All eyes are still towards next week’s Euro summit about the European debt crisis and augmenting the EFSF fund to €2 trillion.
U.S PPI Sharply Inclined in September
The U.S producer price index sharp increase in September by 0.8%; the energy index is one of the prime factors that rose in September by 2.3%, the Producer Price index excluding food and energy slightly increased by 0.2%. This index serves as a good indictor for the upcoming U.S CPI to be published today.
This PPI ex food and energy is estimated to have a lagged negative linear correlation with gold price; i.e. as the PPI rises, gold price tends to decrease the next day, while it has a positive linear correlation with silver price.
U.S Dollar / Gold & Silver Prices – October
The AUD to U.S Dollar exchange rate sharply inclined on Tuesday by 1.03% to reach 1.0141; other currencies also rose against the USD including the Canadian dollar and Euro. If the “risk currencies” (AUD and CAD) will keep on rising today, they could also assist the progress of gold and silver prices during the day.
S&P500 / Gold Price – October
The S&P500 index changed direction again and sharply inclined on Tuesday by 2.04 % to reach 1,225.38; during October the S&P500 index increased by 8.30%. The correlation between the U.S. stock market and gold price nearly eliminated after they had a negative correlation in previous months, but in recent weeks, they seem to move in similar directions.
U.S. Treasuries / Gold Price – October
The U.S. 10-year Treasury yield slightly inclined on Tuesday by 0.01 percent points to 2.19%; during October the 10 year treasury yield rose by 0.27 percent point. In recent weeks gold price and the 10 year securities yields seem to move in similar direction.
Current Gold and Silver Prices
The precious metals prices are currently traded slightly down in the European markets:
Current gold price short term future (November 2011 delivery) is traded at $1,652.10 per t oz. a $0.7 or 0.04% decrease as of 10:16*.
Current silver price short term future (November 2011 delivery) is at $31.625 per t oz – a $0.206 or 0.65% decline as of 10:17*.
The current ratio of gold to silver prices is at 52.24.
Gold and Silver Prices Outlook:
Gold and silver prices broke out of formation as silver price slightly inclined while gold price sharply fell. The U.S. PPI report may have affect gold and silver prices yesterday; today the upcoming housing report and U.S. CPI may also influence precious metals traders as indicated above. Furthermore, the speculation over the next steps of Euro leaders will continue to stir up the markets and may push gold and silver prices throughout the week.
Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):
13:30 – Report of U.S CPI
13:30 – U.S. Building Permits
13:30 – U.S. Housing Starts
15:30 – EIA Report on Crude Oil Stockpiles
13:30 –U.S. Unemployment Claims
15:00 – U.S. Existing Home Sales
15.00 – Philly Fed Manufacturing Index
15:30 – EIA report on U.S. Natural Gas Market
For further reading:
- Weekly Outlook for October 17-21
- Gold and Silver Prices Monthly Outlook for October 2011
- Gold & Silver Prices | Weekly Recap 10-14 October
Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.