Following yesterday’s rises, gold and silver prices continue their rally as they are currently trading up. Will this situation continue? Let’s examine the news related to these precious metals for today, May 25th:
Gold and silver prices – May
Gold price inclined yesterday for the third straight business day by 0.52% as it reached 1,523$.
Silver price bounced back yesterday, and it also inclined by 3.51% to 36.13$.
During May, gold price decreased by 2.1%, while silver price declined by 25.7%.
The chart below of normalized silver and gold prices (Jan 3rd 2011=100) shows that following the rapid rises in silver prices during March and April compared to gold prices, silver prices have fell very precipitately at the beginning of May, and they are close to the normalized gold prices.
The gold to silver ratio: As of Tuesday, May 24th the ratio between gold and silver prices declined to 42.16 – since the beginning of May this ratio inclined by 31.7%.
The chart below shows that this ratio remained around the 42 to 44 mark in the past couple of weeks.
Canadian dollar / US dollar and gold and silver prices
During May, gold and silver prices were correlated with major currencies, in particular to CAD /USD/.
The chart below shows the strong correlation of gold and silver prices (daily percent changes) mainly during May.
Canada is among the leading exporter of gold and silver, and the rapid fall of gold and silver prices during May seem to coincide with the strengthening of the US dollar compared to Canadian dollar.
In May, the CAD/USD rose by 3.3%.
Goldman Sachs and JP Morgan bullish on commodities
Bloomberg continues to report that Goldman Sachs and JP Morgan are go long on major commodities: as Goldman Sachs increased its forecasts on crude oil to rise more than 20% compared to GS’s previous price outlook.
JP Morgan commodity analyst’s recommends that crude oil and gold will lead the charge in the months to come.
These recommendations are probably among the reasons for the recent rally in gold, silver and crude oil prices in the last couple of days.
One of the main concerns that might be responsible to the high gold and silver prices is the investors’ concerns over the debt crisis in Europe, in particular, according to Bloomberg, the questions about restructuring the Greece’s debt.
This news puts additional pressure on Europe and raises its level of risk; usually in times like theses, when the uncertainty rises, major commodities, such as gold, strive.
Current Gold and Silver prices
Major precious metals prices are traded with moderate rises in the European markets:
The current gold price, short term futures (June 2011 delivery) is traded at 1,526.8 USD / t oz. a 3.5$ increase or 0.23%, as of 10.11*.
Current silver price, short term futures is at 36.98 USD / t oz – a 0.852 incline or 2.36%, as of 10.11*.
The current ratio of gold to silver prices is at 41.26.
The USD/CAD is traded up at 0.9789 a 0.2196% rises as of 10.20*.
The AUD/USD is traded up at 1.0498 a 0.5758% falls as of 10.21*.
Gold and silver prices Outlook and Analysis:
Gold and silver prices continue to moderately rise, especially gold, during this week.
The recent updates of the major bankers Goldman Sachs and JP Morgan to go long on major commodities might be among the prime reasons for the recent rally in these metals. We will probably continue to see this rally in the days to come, however, I speculate, it won’t last long and eventually gold and silver prices will remain around the 1,500$-1520$ and 34$-37$, respectively.
The Euro zone continues to pose concerns including the debt crisis in Portugal, Greece and Ireland. This could strengthen the US dollar and eventually curb the rises in major commodities prices.
Here is a reminder of the top events and reports that are planed for today (all times GMT):
Tentative – Publishing the US Treasury Currency Report by the Department of Treasury
13.30 – US Department of Commerce – Report on Durable Goods
15.30 – EIA report about Crude oil inventories
13.30 – Department of Labor report – US unemployment claims
13:30– US GDP 1Q 2011report
15.30 – EIA report about Natural gas storage
For further reading (in this site):
- Weekly outlook for May 23-27
- Gold and Silver ended the week rising – weekly recap 16-20 May
- Gold and silver prices outlook May 2011 – what’s next for gold & silver?