Gold and silver prices bounced back on Friday following the disappointing U.S employment report that may have been among the key factors in dragging down the U.S stock market and oil prices, while pulling up bullion prices. The French elections were held yesterday and the results were that Hollande had won Sarkozy. Many anticipate that this result will have an adverse effect on the Euro.
On today’s agenda the following reports will be released: Australian retail sales, Swiss National Bank Forex Reserves and German factory orders. Currently bullion prices are declining.
Here is a short analysis for precious metals for Monday, May 7th:
Gold and Silver– May Update
Gold rose on Friday by 0.64% to $1,645.2; silver was also traded up by 1.41% to $30.43. Nevertheless, during the week gold decreased by 1.18% and silver by 3.12%.
In the chart below are the normalized prices of bullion during the past few weeks (rates are normalized to 100 as of April 13th).
The ratio between these metals slipped to 54.06. During the week the ratio rose by 2% as gold has outperformed silver during the week. In the chart below are the changes of this ratio during April and May.
According to the recent U.S. employment report the number of non-farm employees increased by only 115,000. The main sectors that expanded during April were in professional and business services, retail sales and health care but declined in transportation and warehousing.
As I have already reviewed in the May gold and silver monthly report, historically, as the non-farm payrolls didn’t rise above expectations gold tended to rise; this correlation was mostly due to the effect this news has had on the U.S dollar; the news of the small gain in the U.S. labor force during April could consequently help rally bullion.
Swiss National Bank Forex Reserves: the central bank of Switzerland will release the total value of its foreign currencies reserves during April;
German Factory orders: this report will highlight the changes in the Germany factory orders during March; this news could indicate the progress of the German Economy and consequently may affect foreign exchange and commodities prices; last time, the orders rose by 0.3%;
Australian Retail Sales: This monthly report will refer to the developments in Australia’s retail sales report for March 2012. The retail sales (seasonally adjusted) edged up by 0.2% in February; this news may affect the strength of the Aussie dollar;
Foreign Exchange / Bullion Market – May Update
The Euro/U.S Dollar declined again on Friday by 0.53% to 1.3083. During last week the Euro/U.S Dollar decreased by 12.29%; furthermore, the Canadian dollar and Aussie dollar also depreciated on Friday against the U.S. dollar by 0.78% and 0.83%, respectively. Since the Euro, Aussie dollar and Canadian dollar are strongly and positively correlated with precious metals prices, if the U.S dollar will continue to appreciate against these exchange rates; this may negatively affect gold and silver . Currently the Euro is falling against the USD.
Current Bullion Rates as of May 7th
Gold (June 2012 delivery) is traded at $1,638.8 per t oz. a $6.4 or 0.39% decrease as of 08:51*.
Silver (June 2012 delivery) is at $30.16 per t oz – a $0.272 or 0.89% decrease as of 08:51*.
Daily Outlook for May 7th
Gold and silver prices may have bounced back on Friday plausibly on the account of the weak U.S non-farm employment, but both metals might continue their recent downward trend. The results in the French elections might adversely affect the Euro and in turn may also pull down commodities prices including gold and silver. Alternatively, the upcoming German factory orders might curb the current fall of the Euro if the report will be positive.
Here is a reminder of the top events and reports that are planned for today and tomorrow (all times GMT):
02:30 – Australian Retail Sales
08:00 – Swiss National Bank Forex Reserves
12:00 – German Factory orders
2:30 – Australian Trade Balance
10:30 – Australian Annual Budget Release
15:30 – ECB President Draghi Speaks
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