Gold and silver prices continue to dwindle as both metals edged down for the second consecutive day. Even the hike in Euro/USD and other related currencies such as the Aussie dollar didn’t reverse the decline in precious metals prices. The rate of U.S housing starts decreased last month while the rate of building permits rose. This news also didn’t seem to have much of an effect on the bullion market. After the hike in Spanish bond yields they have finally changed direction and started to come down. They are still high at 7.03%, after they had reached 7.29%. The FOMC meeting will end today (update: FOMC extends operation twist until the end of 2012) and will conclude with a press conference and a statement about its updated monetary policy. Currently gold is declining. On today’s agenda: the minutes of the recent MPC meeting will come out, and China’s manufacturing PMI flash report.
Here is a short analysis for gold and silver for Wednesday, June 20th:
Precious Metals –June Update
Gold price edged down on Tuesday by 0.23% to $1,623.2; silver also fell by 1.06% to $28.37. During the month gold rose by 3.77% and silver by 2.2%.
The chart below shows the normalized rates of these precious metals during June (normalized to 100 as of May 31st).
According to the latest U.S. Census Bureau report the annual rate of housing starts declined while the rate of building permits rose. This report sends another mixed signal of the development in the housing market.
As I have sited in past posts, there is a supposed lagged (by one day) and negative correlation between the monthly changes in housing starts and daily shifts in gold price; i.e. as the annual rate of housing starts falls, gold tends to rise the following day. If this relation will hold up it could positively affect gold during today’s trading.
On Today’s Agenda
Statement of FOMC Meeting: Following a two day meeting, the FOMC will release a statement updating its monetary policy. I think the FOMC won’t announce of another stimulus plan, especially after the recent testimony of given by Bernanke; if there will be a change in the FOMC’s policy in the statement, then it may affect the USD and gold and silver prices; I speculate if there won’t be another call for a stimulus plan or even a hint moving toward this direction in the near future, gold and silver prices are likely to decline;
FOMC Economic Projection: the FOMC will update its estimate on U.S economic growth and inflation for 2012 and 2013. Based on this projection, it could also explain the FOMC monetary policy and recent statement;
FOMC Press Conference – Bernanke Speaks: following the FOMC meeting the Chairman of the Fed will give a speech to sum up the main points of the recent FOMC meeting and decisions; Bernanke’s speech could influence stocks, commodities and forex traders;
MPC Meeting Minutes: Following the recent MPC meeting, in which it was announced the rate will remain flat at 0.5% and the asset purchase program, will stay at £325 billion, despite the concerns the MPC have about the rising inflation;
China flash Manufacturing PMI: according to the HSBC Manufacturing PMI report for April the Manufacturing PMI edged down to 48.7; this index indicates the developments in China’s manufacturing sectors growth; if this negative growth will continue, this may also adversely affect bullion prices;
Currencies / Gold & Silver Market – June Update
The Euro/US Dollar hiked on Tuesday by 0.86% to 1.2685. During the month (UTD) the Euro/U.S Dollar increased by 2.58%. Furthermore, other exchange rates including the Aussie dollar and Canadian dollar also appreciated during Tuesday against the USD by 0.64% and 0.63%, respectively. Despite the recovery of the Euro and Aussie dollar, both gold and silver didn’t seem to be affected from it as both metals were traded down. Nonetheless, if the U.S dollar will continue to depreciate against these currencies, it may curb the fall of bullion rates. Currently the Euro is edging down against the USD.
Current Gold and Silver Rates as of June 20th
Gold (July 2012 delivery) is traded at $1,619.9 per t oz. a $3.3 or 0.2% decrease as of 08:10*.
Silver (July 2012 delivery) is at $28.405 per t oz – a $0.037 or 0.13% increase as of 08:10*.
Daily Outlook for June 20th
The upcoming FOMC statement and press conference could result in yet another storm in a teacup especially if the Fed won’t budge from its current monetary policy. Since the prices of bullion have already tumbled down after the testimony of the Chairman of the Fed, then if the FOMC won’t come up with big headlines, precious metals are likely to trade down (but I speculate not by much). Of course if the Fed will make an announcement or even hint it will consider anther stimulus plan this news could rally bullion rates. Finally the upcoming China’s manufacturing PMI might also affect commodities markets if there will be a sharp shift in this index.
Here is a reminder of the top events and publications that are scheduled for today and tomorrow (all times GMT):
09:30 – MPC Meeting Minutes
17:30 – FOMC Meeting (Statement)
19:00 – FOMC Economic Projection
19:15 – FOMC Press Conference – Bernanke Speaks
3:30– China flash Manufacturing PMI
09:00 – Euro Area Manufacturing PMI (June 2012)
09:30 –Retails Sales GB (May 2012)
Tentative – British 10 Year Bond Auction
13:30 –Retails Sales Canada (April 2012)
13:30 – U.S. Jobless Claims Weekly Report
15:00 – U.S. Existing Home Sales
15:00 – Philly Fed Manufacturing Index
15:30 – EIA U.S. Natural Gas Storage Update
17:00 – ECB President Draghi Speaks
For further reading: