Gold and silver prices resumed their downward trend on Monday as they have declined in the past five out of sic business days. The results in the French and Greek elections may have had a slight negative effect on the Euro, which in turn may have also adversely affected commodities prices. Despite the decline in gold prices, China’s imports of gold from Hong Kong continue to surge in the first quarter of 2012. Currently bullion rates are tumbling down.
On today’s agenda: Australian trade balance report, ECB President speaks and Australian annual budget release.
Here is a short analysis for bullion for Tuesday, May 8th:
Precious Metals– May Update
Gold slipped on Monday by 0. 37% to $1,639.1; silver also declined by 1.02% to $30.12. During the month gold decreased by 1.51% and silver by 2.88%.
In the chart below are the normalized prices of bullion during the past few weeks (rates are normalized to 100 as of April 30th).
The ratio between these metals slipped to 54.42. During the month the ratio rose by 1.41% as gold has moderately outperformed silver during the month. In the chart below are the changes of this ratio during May.
According to the recent report regarding March 2012, the seasonally adjusted balance of goods and services expanded from a deficit of $754 million in February 2012 to a $1,587 million deficit in March 2012.
The export of non-monetary gold rose again by $75 million (6%); as exports continue to expand, this might suggest a rise in demand for non-monetary gold despite the recent decline in prices (see here last report);
On Today’s Agenda
ECB President Draghi Speaks: Following the ECB rate decision to keep in unchanged at 1% the President of the European Central Bank, Mario Draghi will speak; his speech may include the recent events in Europe and may talk about the ECB’s monetary plan if he will refer to implementing LTRO 3 this may affect the Euro/USD, which is strongly linked with metals ;
Australian Annual Budget Release: this report will outline the government budget of Australia for 2012; if there will be a hike in the budget deficit it could have an adverse effect on the Aussie dollar;
Foreign Exchange / Bullion Market – May Update
The Euro/U.S Dollar slipped again on Monday by 0.24% to 1.3051. During the month so far the Euro/USD decreased by 1.42%; on the other hand, the Canadian dollar and Aussie dollar slightly appreciated on Monday against the U.S. dollar by 0.29% and 0.17%, respectively. Since the Euro, Aussie dollar and Canadian dollar are strongly and positively correlated with precious metals (see the chart below for the linear correlations among these currencies of the daily percent changes during April and May), if the U.S dollar will appreciate against these exchange rates; this may continue to affect metals prices to decline. Currently the Euro is decreasing against the USD.
Current Bullion Rates as of May 8th
Gold (June 2012 delivery) is traded at $1,604.4 per t oz. a $34.7 or 2.12% decrease as of 15:18*.
Silver (June 2012 delivery) is at $29.38 per t oz – a $0.742 or 2.46% decrease as of 15:18*.
Daily Outlook for May 8th
Gold and silver prices resumed yesterday their downward tend and until there will be a surprise announcement from the Fed of another QE program or a substantially negative report from the U.S, I suspect gold and silver will continue their downward trend. The current tumbling down of precious metals prices coincides with the decline in other financial markets including crude oil, forex and stocks even though the reaction in the bullion market seems a bit more severe than in other markets. The speech of ECB President might affect the Euro especially if he will refer to the ECB plans to expand their monetary policy. Finally, the Australian budget might affect the Aussie dollar, which is also strongly correlated with precious metals .
Here is a reminder of the top events and reports that are planned for today and tomorrow (all times GMT):
2:30 – Australian Trade Balance
10:30 – Australian Annual Budget Release
15:30 – ECB President Draghi Speaks
00:30 – Japan Current Account
15:30 – U.S Crude Oil Stockpiles Report
18:00 – 10 Year Bond Auction
2:30 – Australia Rate of Unemployment
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