Gold and silver declined again for the second straight day. Will this weakness in the bullion market continue? The Euro Area GDP contracted during the second quarter of 2012 by 0.2%. This news may have contributed to the decline of not only the Euro but also bullion rates. On the other hand, the positive news from the U.S on the rise in retail sales may have helped rally major commodities prices. U.S PPI rose by 0.3% during last month, while core PPI increased by 0.4%. This news tends to be negatively related with the prices of precious metals. Currently, gold and silver prices are falling. On today’s agenda: the Minutes of the MPC Meeting, U.S Core Consumer Price Index, and U.S. TIC Long Term Purchases.
Here is a short outlook for precious metals for Wednesday, August 15th:
Precious Metals –August Update
On Tuesday, Gold slipped by 0.65% to $1,602.1; Silver also edged down by 0.01% to $27.85. During August, gold declined by 0.77%; silver, by 0.24%.
As seen below, the chart presents the changes of normalized prices of precious metals in during the month (normalized to 100 as of July 31st). During August gold and silver remained nearly unchanged.
The ratio between the two precious metals slipped on Tuesday to 57.53. During August the ratio edged down by 0.54% as silver slightly out-performed gold.
On Today’s Agenda
U.S Core CPI: According to the U.S Bureau of Labor statistics during June, the core CPI rose by 0.2% (M-o-M) and the index increased over the last 12 months by 2.2%; the CPI remained unchanged last month;
MPC Meeting Minutes: in the recent MPC meeting it was announced the rate will remain flat at 0.5% and the asset purchase program will remain at £375 billion; the MPC still has concerns about inflation. The minutes of the recent meeting might offer some insight behind this decision;
U.S. TIC Long Term Purchases: The Treasury International Capital report will present the changes in the purchases and sales of US long term treasuries in June 2012. In the previous report regarding May 2012, the net foreign sales of U.S Treasuries longer-term notes reached $55 billion;
Currencies / Bullion Market –August Update
The Euro/ USD changed direction again and edged down on Tuesday by 0.09% to 1.2322. During August (UTD) the Euro/USD nearly didn’t changed as it edged up by 0.15%. Further, other currencies including Aussie dollar also depreciated on Tuesday against the USD by 0.26%. The linear correlation between gold and Euro is still robust: during the past several weeks, the correlation between the gold and EURO/USD was 0.50 (daily percent changes). Therefore, if the Euro will trade down against the USD, it could also pull down precious metals.
As seen below, chart shows the changes in the linear correlation between silver, gold and Euro/USD. The correlation between gold and Euro/USD declined during the month but remained strong.
Daily Outlook for August 15th
Gold and silver prices continued to trade down and as long as there is no big surprise from the U.S or Europe the bullion market will remain at their respective range. The upcoming U.S reports including CPI and TIC Long Term Purchases could affect bullion prices as indicated above.
Finally, if the Euro and other “risk currencies” will continue to dwindle against the USD it could contribute to the decline of precious metals rates.
Here is a reminder of the top events and publications that are scheduled for today and tomorrow (all times GMT):
Today
09:30 – MPC Meeting Minutes
13:30 –U.S Core Consumer Price Index
14:00 – U.S. TIC Long Term Purchases
15:30 – U.S Crude Oil Stockpiles Report
Tomorrow
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
For further reading: