Gold and silver prices continued their downward trend during yesterday’s trading despite the slightly positive news of the higher than expected growth rate of Germany’s GDP in the Q1 2012 (a growth rate of 0.5%); the news of the new elections in Greece to be held in June raised the anxiety in the markets and dragged down the Euro. This news may continue to affect the forex and commodities markets in the days to follow. On today’s agenda: the minutes of April FOMC meeting, U.S housing starts report, Bank of England’s Governor King speaks, ECB President speaks, Japan’s Preliminary GDP 1Q2012, Euro Area Annual Inflation, German 10 Year Bond Auction will be held and BOE Inflation Report . Currently precious metals prices are plummeting.
Here is a short analysis for gold and silver prices for Wednesday, May 16th:
Precious Metals – May Update
Gold price slipped again on Tuesday by 0.25% to $1,557.1; silver also declined by 0.96% to $28.08. During the month gold fell by 6.44% and silver by 9.47%.
The chart below presents the normalized rates of precious metals during month so far (both metals rates are normalized to 100 as of April 30th).
The ratio between two precious metals continued to rise as it reached yesterday 55.45. During the month the ratio increased by 3.35% as silver has moderately under-performed gold during the month. In the chart below are the developments of this ratio during May.
Minutes of April FOMC Meeting: Following the recent FOMC meeting, in which it was decided to keep the monetary policy unchanged, the market didn’t react to this news as gold and silver prices only slightly rose. The minutes of the FOMC meeting might offer some insight behind this decision regarding the future steps of the FOMC;
U.S. Housing Starts & Building Permits : the housing starts figures were historically correlated with gold– as housing starts declined, gold prices tended to increase the following day (even when controlling to the U.S dollar effect); in the previous report, the adjusted annual rate declined by 5.8% (M-O-M) to 654,000 in March;
Japan’s GDP 1Q2012: Japan continues to demonstrate weakness as its gross domestic product shrunk by 0.6% during the fourth quarter of 2011, but expanded by 1.5% during the third quarter of 2011 (in annul terms). This news could affect the Japanese Yen;
German 10 Year Bond Auction: the German government will issue a bond auction;
Euro Area Annual Inflation (April): the inflation in Euro Area remained unchanged at 2.7% in March. the flash report for April the inflation rate edged down to 2.6%; If the upcoming inflation rate estimate will confirm the flash report’s figure, it may affect the ECB monetary policy;
Bank of England’s Governor King speaks: The governor of Bank of England will speak in a press conference and his speech could offer some insight to the recent BOE interest rate decision and monetary policy; this speech may affect the British Pound trading;
BOE Inflation Report: in the previous report the inflation sharply fell from its peak in late 2011;
ECB President Draghi Speaks: Following the ECB rate decision to keep the policy unchanged and the interest rate at 1% the President of the European Central Bank, Mario Draghi will talk in the European Central Bank colloquium; the title of his speech is “Monetary Policy in Unconventional times“;
Forex / Gold & Silver Market – May Update
The Euro/U.S Dollar declined again on Tuesday by 0.73% to 1.2729 – the lowest level since January 2012. During the month (UTD) the Euro/U.S Dollar pair fell by 3.9%; furthermore, the Aussie dollar slightly depreciated on Tuesday against the U.S. dollar by 0.21%. As indicated below the correlation between gold and Euro/USD slightly fell in recent weeks but is still mid-strong (currently it stands at 0.33). Nevertheless, since these currencies pairs are still strongly and positively correlated with precious metals prices, as the U.S dollar continues to appreciate against the Euro and Aussie dollar, bullion prices may continue to be adversely affected from this trend. Currently the Euro is falling against the USD.
Current Gold and Silver Prices as of May 16th
Gold (June 2012 delivery) is traded at $1,532.8 per t oz. a $24.3 or 1.56% decrease as of 07:52*.
Silver (June 2012 delivery) is at $27.32 per t oz – a $0.76 or 2.71% decrease as of 07:52*.
Daily Outlook for May 16th
I speculate gold and silver prices will continue their downward trend during today’s trading. The upcoming reports from the U.S may curb this downward trend if the housing starts will continue to fall and if the FOMC minutes might reveal some more hints of a potential monetary expansion is in the horizon (I suspect low chances for this in the near future). The political developments in the Euro Area mainly Greece may keep the anxiety levels in the financial markets high so that the Euro might continue its weakness against the USD; this Greek news may also drag along with it commodities prices. Finally, the upcoming report on the Euro Area inflation, BOE inflation and Japan’s GDP may affected each region’s respective currency and thus may also a slightly affect the bullion market.
Here is a reminder of the top events and reports that are planned for today and tomorrow (all times GMT):
Tentative – German 10 Year Bond Auction
10:00 – Euro Area Annual Inflation (April)
10:30 –Bank of England’s Governor King speaks
10:30 –BOE Inflation Report
13:30 – U.S. Housing Starts
13:30 – U.S. Building Permits
15:00 – ECB President Draghi Speaks
15:30 – U.S Crude Oil Stockpiles Report
19:00 – FOMC Meeting Minutes
23:50– Japan’s Preliminary GDP 1Q2012
Tentative – Spanish 10 Year Bond Auction
13:30 – U.S. Jobless Claims Weekly Update
15:00 – Philly Fed Manufacturing Index
15:30 – EIA U.S. Natural Gas Storage Update
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