Gold and silver edged up on Wednesday after they had declined during the first two days of the week. The bullion market continues to seek direction as both metals nearly didn’t change during the month. The U.S CPI remained unchanged during July while the core CPI edged up by 0.1%. Currently, gold and silver prices are rising. On today’s agenda: GB Retails Sales, U.S. Housing Starts and Building Permits, U.S. Jobless Claims, and Philly Fed Manufacturing Index.
Here is a short outlook for precious metals for Thursday, August 16th:
Precious Metals –August Update
On Wednesday, Gold edged up by 0.28% to $1,606.6; Silver also edged up by 0.18% to $27.9. During August, gold declined by 0.5%; silver, by 0.06%.
As seen below, the chart shows the changes of normalized prices of precious metals in during the month (normalized to 100 as of July 31st). During the month gold and silver remained nearly unchanged.
The ratio between the two precious metals rose on Wednesday to 57.59. During August the ratio edged down by 0.43% as silver slightly out-performed gold.
On Today’s Agenda
Philly Fed Manufacturing Index: This monthly survey measures the manufacturing conditions. In the previous July survey, the growth rate rose from -16.6 in June to -12.9 in July. If the index will remain negative it may adversely affect not only U.S Dollar but also commodities prices (the recent Philly Fed review);
Retails Sales GB (July 2012): This news may affect the direction of the British Pound exchange rate. In the previous report regarding June 2012, retails sales edged up by 0.1%;
U.S. Housing Starts: this report was historically correlated with gold price – as housing starts increased, gold prices tended to fall the following day (even when controlling to the U.S dollar effect); in the previous report, the adjusted annual rate reached 760,000 in June, which was 6.9% above May’s rate;
U.S. Building Permits: The latest report building permits declined by 3.7% (M-o-M) in the adjusted annual rate of building permits and reached 755,000 in June (the recent U.S building permits and housing starts review);
U.S. Jobless Claims Weekly Report: in the recent update the jobless claims fell by 6k to 361,000; this upcoming weekly update may affect the U.S dollar and consequently precious metals rates;
Currencies / Bullion Market –August Update
The Euro/ USD edged down again on Wednesday by 0.26% to 1.229. During August (UTD) the Euro/USD nearly didn’t changed as it slipped by 0.11%. Alternatively, other currencies including Aussie dollar and CAD appreciated on Wednesday against the USD by 0.15% and 0.29%, respectively. The linear correlation between gold and Euro is still strong and positive: during the past several weeks, the correlation between the gold and EURO/USD was 0.49 (daily percent changes). Therefore, if the Euro will continue to fall against the USD, it could also drag down precious metals. Currently, the Euro/USD is falling.
Daily Outlook for August 16th
Gold and silver prices changed direction from their downward trend as they have bounced back on Wednesday after they had declined during the first two days of the week. The ongoing decline of the Euro is probably curbing the rise of precious metals, while the increase in other “risk currencies” such as Aussie dollar and CAD is helping bullion rates to edge up. The upcoming U.S reports that will come out today including the housing starts and Philly Fed could affect not only bullion market but also stocks and forex markets. If the housing starts will continue to rise and if the Philly Fed index will continue to be negative, then precious metals prices may resume their downward trend. The change in market sentiment in which major hedge funds become less bullish on silver may also contribute to the weakness of precious metals. Finally, if the Euro and other “risk currencies” will fall against the USD it could contribute to the weakness of precious metals rates.
Here is a reminder of the top events and publications that are scheduled for today and tomorrow (all times GMT):
09:30 –Retails Sales GB (July 2012)
13:30 – U.S. Housing Starts
13:30 – U.S. Building Permits
13:30 – U.S. Jobless Claims Weekly Report
15:00 – Philly Fed Manufacturing Index
13:00 – Canada’s Core CPI
14:55 – UoM Consumer Sentiment
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