Gold and silver prices tumbled down during yesterday’s trading. This fall didn’t come after a fundamental change but rather on account of the recent developments in Europe, in particular the aftermath of the recent elections in France and Greece. This news adversely affected not only precious metals prices but also other commodities prices such as oil prices and U.S and Europe stock markets. Currently the rise of extreme parties in Greece and the difficulty of its leaders in forming the coalition, raise the concerns of Greece keeping up with its austerity plan. Despite these events the Euro is only slowing falling against the USD and didn’t tumble down as gold and silver did during the week so far.
On today’s agenda: Australian employment report, Japan’s current account and the U.S will issue a 10- year bond auction. Currently bullion rates are declining.
Here is a short analysis for gold and silver for Wednesday, May 9th:
Precious Metals – May Update
Gold tumbled down on Tuesday by 2.11% to $1,604.5; silver also decreased by 2.2% to $29.46. During the month gold decreased by 3.59% and silver by 5.02%.
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 gold and silver slightly rose to 54.47. During the month the ratio increased by 1.51% as gold has moderately outperformed silver during May. In the chart below are the changes of this ratio during May.
As indicated in the chart below the linear correlation between gold and silver was at 0.923 i.e. strong and positive relation; this means despite the different daily percent changes of gold and silver, their relation remains strong and robust.
Japan Current Account: this report will show the shifts in the difference between exports and imports for Japan during last month; this news may affect the strength of the Japanese Yen;
10 Year Bond Auction: the U.S government will issue a bond auction;
Australia Rate of Unemployment: in the previous report regarding March 2012 the rate of unemployment remained flat at 5.2%; the number of employed fell by 15,400 people; the number of employed slightly rose by 6,500 during March compared with February‘s figures. If this trend ill continue to could affect the Australian dollar, which is strongly linked with bullion prices (see here the recent report);
Foreign Exchange / Precious Metals Market – May Update
The Euro/U.S Dollar declined again on Tuesday by 0.34% to 1.3006. During the month so far the Euro/U.S Dollar decreased by 1.76%; furthermore, the Canadian dollar and Aussie dollar also depreciated on Tuesday against the U.S. dollar by 0.54% and 0.74%, respectively. Since the Euro, Aussie dollar and Canadian dollar are strongly and positively correlated with gold and silver (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 continue to appreciate against these exchange rates; this may continue to adversely affecting bullion. Currently the Euro is decreasing against the USD.
Current Bullion Rates as of May 9th
Gold (June 2012 delivery) is traded at $1,594.5 per t oz. a $10 or 0.62% decrease as of 07:41*.
Silver (June 2012 delivery) is at $29.15 per t oz – a $0.309 or 1.05% decrease as of 07:41*.
Daily Outlook for May 9th
Gold and silver prices tumbled down yesterday and at least for gold yesterday’s decline by over 2% was the sharpest single day fall since April 4th when the FOMC minutes of the previous meeting was published. This time the tumble may have been stem from the recent developments in Europe as stated above. In many cases in the past after a sharp fall, there used to be a correction. I speculate that all things being equal gold and silver prices will continue with their general downward trend during the day.
Here is a reminder of the top events and reports that are planned for today and tomorrow (all times GMT):
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
Tentative –China’s Trade Balance
Tentative –OPEC Monthly Report
12:00 – Great Britain Bank Rate & Asset Purchase Plan
13:30 –American Trade Balance
13:30 –Canadian Trade Balance
13:30 – U.S. Department of Labor– Jobless Claims Weekly Report
15:30 – EIA U.S. Natural Gas Storage Report
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