Gold prices forecast & Silver price outlook June 8th 2011

Gold and silver prices continue to fluctuate with no clear trend as they did in the past few weeks. Let’s examine the precious metals market for today, June 8^th:

Gold and silver prices – June

Gold price finished June 7^th with a 0.21% drop as it reached $1,544.

Silver price on the other hand continued to incline following the falls it had during last week; yesterday it inclined by 2.47% to $37.05.

During June, gold price increased by 0.5%, while silver price declined by 3.3%.

In the chart below are the normalized silver and gold prices (May 31^st 2011=100): it shows the fall of silver price at the beginning of June, which then followed with moderate rises; gold price on the other hand moderately crawled up during June (up to date).

The gold to silver ratio: As of Tuesday, June 7^th the ratio between gold and silver prices fell to 41.68, but during June, this ratio inclined by 3.1%. During most of May and part of June the ratio trend was upward as silver price has been underperforming compared with gold price during that time.

The chart below shows the recent changes of this ratio since March up to June 7^th 2011.

US Dollar and Gold and silver prices – June update

On Tuesday June 7^th, the US dollar depreciated compared with major currencies including Euros to USD and USD and Canadian dollar exchange rates by 0.79% and 0.65%, respectively.

The weakening of the US dollar yesterday might have been one the factors to affect the rise in silver prices yesterday.

Ben Bernanke gave yesterday a speech about the economic outlook of the US economy. He stated that the Fed will continue to keep the current monetary policy of keeping rates low and completing the stimulus plan by the end of the month (see here for more on his speech).

Gold & silver prices and S&P500

As presented in the past gold and silver prices were strongly correlated with S&P500 during May, even though there were very weak correlations between gold and silver (daily percent changes) and S&P500 in previous months.

Currently, during June, there seems to be very little correlations between these indexes as S&P500 started June with falls, while gold price moderately inclined during that time.

The Greek Debt – update

According to Bloomberg, the European Central Bank President Jean- Claude Trichet signals that he is for taking measures to encourage investors to buy New Greek bonds and replace the old ones. This news regarding the Greek debt will continue to affect the strength of the Euro compared with other major currencies and could also further affect the changes in gold and silver prices.

Euro Rate decision

Tomorrow the ECB will decide the interest rate decision. This could have an effect on the Euro if ECB will raise the interest rate, but currently it seems that ECB will keep rates at their current low level of 1.25%.

Current Gold and Silver prices

The precious metals prices are currently traded with moderate falls in the European markets:

The current gold price, short term futures (July 2011 delivery) is traded at $1,538.1 per t oz. a $5.9 drop or 0.38%, as of 09:49*.

Current silver price, short term futures is at $36.53 per t oz – a $0.516 incline or 1.39%, as of 09:49*.

The current ratio of gold to silver prices is at 42.10.

(* GMT)

Gold and silver prices Outlook and Analysis:

The current situation in the U.S. and Europe draw most of the financial community’s attention as the two economies are trying to get over their recession and debt problems.

Currently, it’s not clear which economy will prevail that will determine the direction of the Euros to USD exchange rate and consequently the direction of gold and silver prices; if the US dollar will weaken, this might strengthen gold and silver prices.

In the mean time, I still speculate that gold and silver prices will maintain their current price level until a new development will occur in the financial markets.

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

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