Gold and silver prices started off the week with mixed trend and remained nearly unchanged in the past couple of weeks. Will this situation continue? Let’s examine the news related to these precious metals for today, May 24th:
Gold and silver prices – May
Gold price started off the week with a moderate rise of 0.43% as it reached 1,515$.
Silver price on the other hand fell by 0.52% to 34.90$.
During May gold price decreased by 2.6%, while silver price declined by 28.2%.
The chart below of normalized silver and gold prices (100= May 2nd) shows that since May 4th, gold prices ranged within 3.5%; silver prices ranged within 5% in the last ten days.
The gold to silver ratio: As of Monday, May 23rd the ratio between gold and silver prices inclined to 43.42 – since the beginning of May this ratio inclined by 35.6%. The ratio could be interpreted as one troy ounce (31.1 gram) of gold is worth 43.42 troy ounces of silver.
US dollar and gold and silver prices
During May, gold and silver prices were correlated with major currencies including AUD/USD, USD/CAD and USD/YEN.
The chart below shows the strong correlation of gold and silver prices (daily percent changes) with these major currencies during May.
Thus, the correlations above imply that as AUD and CAD strengthen against the US dollar, so do gold and silver prices tend to rise; as the Yen weakens against the US dollar, gold and silver prices also tend to rise.
Goldman Sachs and JP Morgan are getting bullish on commodities
Despite the falls at the beginning of May in gold and silver prices, Bloomberg reports that Goldman Sachs and JP Morgan are saying to go long on major commodities: Goldman Sachs recommends to buy crude oil, copper and zinc, while JP Morgan recommends crude oil and gold as the major commodities that will lead the charge in the months to come.
These new recommendations might stimulate an increase in demand for these major commodities during the day.
The debt crisis in Europe continues: according to Bloomberg, the Greek 10-year government bonds declined very sharply on May 20th and thus the speculation around Greece’s capability in returning its debt is high.
This news puts more pressure on Europe and raises its level of risk; usually in times like theses, when the uncertainty rises, major commodities, such as gold, strive.
There are still speculations around the future economic growth of China – one of the leading consumers of gold and silver, after India. The recent raise in reserve requirements ratio by People Bank of China, and the raises in interest rates during 2011, will eventually start to affect China’s economic growth and consequently its demand for major commodities including gold and silver.
Current Gold and Silver prices
Major precious metals prices are traded with moderate rises in the Asian markets:
The current gold price, short term futures (June 2011 delivery) is traded at 1,518.0 USD / t oz. a 2.6$ increase or 0.17%, as of 07.34*.
Current silver price, short term futures is at 35.22 USD / t oz – a 0.316 incline or 1.15%, as of 07.34*.
The current ratio of gold to silver prices is at 43.10.
The USD/YEN is traded down at 81.697 a 0.3756% falls as of 07.45*.
The AUD/USD is traded up at 1.056 a 0.5188% rises as of 07.45*.
Gold and silver prices Outlook and Analysis:
Gold and silver prices continue to moderately change with no clear trend as they did in the past couple of weeks.
Factors that might push gold and silver prices up:
The Fed’s next move in stimulating the US economy that might affect the strength of US dollar once the quantitative plan will end next month.
Factors that might drive gold and silver prices down:
China’s slow down in its economic growth, which might affect its demand for precious metals.
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.
In the mean time, I still speculate that gold and silver prices will remain around 1,500$ and 35$, respectively.
Here is a reminder of the top events and reports that are planed for today (all times GMT):
23.50 – Report of Japanese Trade balance (for April)
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
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?