Gold & Silver Prices change direction and are falling – Outlook 11 May

Gold and silver prices are currently traded at falls, after they have risen in the past couple of days; will these rises continue? Let’s examine the precious metal market for May 11th:

Gold and silver prices – May

Gold prices continue to rise yesterday and reached 1,503$, an incline of 0.91%.

Silver price also rose and reached yesterday 38.49$ a rise of 3.69%.

During May, gold price decreased by 2.5%, while silver price declined by 20.8%.

The chart below of normalized silver and gold prices (100= May 2nd) shows that they are still traded below their initial price level they started at the beginning of May.


Gold prices forecast & silver price outlook 2011 MAY 11

The gold to silver ratio: As of yesterday, May 10th the ratio between gold and silver prices fell to 39.41. The ratio could be interpreted as one troy ounce (31.1 gram) of gold is worth 39.41 troy ounces of silver.


Gold prices forecast & silver price outlook ratio 2011 MAY 11

The gold to silver ratio rose very rapidly by over 23.1% during May. In the last few days, however the ratio started to decline again.

The Yen connection

Notice that in the chart below, the linear correlation of the daily percent changes among gold prices, silver prices and USD/YEN exchange rate showed strong positive correlations.


Correlation Gold & Silver Prices and USD yen currency Dec 2010- May 2011 may 11

As the USD /yen exchange rate declined up to yesterday by 0.4%, i.e. the US dollar depreciated against the Japanese yen, gold and silver prices also declined as stated above.

The chart also shows of a change in correlation in the past several months in these correlations. This might suggest of the rising importance of the yen and the Japanese economy in affecting the precious metals prices. As the month will progress it will be interesting to see if this correlation will continue to hold or this finding is just noise.

China’s inflation concerns

According to the Statistics Bureau in Beijing, the Consumer Price index of China inclined during April by 5.3% (Y-2-Y).

This increase in inflation might affect the decision of People Bank of China to raise interest rate or banks’ reserve requirements in an attempt to curb the inflation pressures. This might also curb the demand for gold and silver in China.

It’s already reported that China’s companies are pulling back from major commodities and are reducing their purchases in 2011.


Update from Middle East

See here for a more detailed update on Middle East and its effect on commodities’ markets.


Current Gold and Silver prices

In the U.S. markets, major precious metals prices are traded downward:

The current gold price, short term futures (June 2011 delivery) is traded at 1,509.7 USD / t oz. a 7.2$ increase or 0.47%, as of 16.26*.

Current silver price, short term futures is at 36.775 USD / t oz – a 1.711 decline or 4.45%, as of 16.26*.

(* GMT)

The current ratio of gold to silver prices is at 41.03.


Gold and silver prices Outlook and Analysis:


The decline in major commodities prices mainly of silver prices during last week seems like a distance memory as gold and silver prices climbing up during this week. I think that the traders and investors are waiting for the next earthquake in the financial markets; this might come from the US in preparation for tomorrow’s testimony by Chairman of the Federal Reserve – Ben Bernanke in regards to the future plans of the Fed once the quantitative easing plan will end in June. In the mean time, silver and gold prices are likely to moderate fluctuate with no clear trend until there will be news from the U.S.



Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):


13.30 –Canadian Trade balance

13.30 – Report on American Trade balance

15.30 – EIA report about Crude oil inventories


13.30 – Department of Labor report – US unemployment claims

15.00 – Ben Bernanke, Chairman of Fed, testifies

15.30 – EIA report about Natural gas storage



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