Gold and silver prices sharply declined for the fourth consecutive business day. Yesterday both metals were traded down following the U.S jobless claims and sharply fell even below expectations. On the other hand the U.S non-manufacturing PMI dropped to 53.5. The forex market didn’t move much but U.S stock markets and major commodities prices declined during yesterday’s trading. It was also reported that gold producers (including Barrick) aren’t doing well as their suffering from rising labor costs and delays. ECB President took a page from Bernanke’s book and also didn’t introduce additional stimulus plan or another rate cut.
Today, the U.S non-farm report (update: U.S employment rose by only 115k) will come out and there are exceptions it won’t be much better than last month’s report. This news items may stir up the markets including bullion markets. Currently precious metals are rising.
Here is a short analysis for bullion for Friday, May 4th:
Bullion – May Update
Gold sharply declined on Thursday by 1.16% to $1,634.8; silver also declined by 2.07% to $30.01. During the week gold decreased by 1.8% and silver by 4.5%.
In the graph below are the normalized prices of bullion during the past several weeks (rates are normalized to 100 as of April 13th).
The ratio between gold and silver rose to 54.48. During the week the ratio rose by 2.78% as gold has outperformed silver during the week. In the chart below are the changes of this ratio during April and May.
U.S. Non-Farm Payroll Report: in the previous report for March, the U.S employment market didn’t improve as it did in the previous months as the number of non-farm payroll employment increased by only 120k; the U.S unemployment rate slipped to 8.2%; if the upcoming report will be positive and reach the 180-200 thousand mark (in additional jobs), this may lower the chances of the Fed to introduce additional stimulus plan in the future FOMC meeting; this report might affect not only the USD, but also bullion . The chart below should give you some sense of the linear correlation between the news of the labor market and the changes in the daily percent changes in gold and silver .
The Euro/U.S Dollar slipped on Thursday by 0.04% to 1.3153. During the week the Euro/U.S Dollar decreased by 0.8%; furthermore, the Canadian dollar and Aussie dollar also depreciated on Thursday against the U.S. dollar by 0.21% and 0.67%, respectively. Since the Euro, Aussie dollar and Canadian dollar are strongly and positively correlated with gold and silver , if the U.S dollar will keep appreciating against these exchange rates; this may negatively affect gold and silver .
Current Bullion Rates as of May 4th
Gold (June 2012 delivery) is traded at $1,636.3 per t oz. a $1.5 or 0.09% increase as of 01:11*.
Silver (June 2012 delivery) is at $30.13 per t oz – a $0.12 or 0.4% increase as of 01:11*.
Daily Outlook for May 4th
Gold and silver prices continued their downward trend and this may change direction today if the U.S non-farm employment will disappoint again and will be well below exception. On the other hand, if the U.S dollar continues its rally against major currencies this may keep gold and silver weak.
Here is a reminder of the top events and reports that are planned for today (all times GMT):
13:30 – U.S. Non-Farm Payroll Report
For further reading: