Gold and silver prices continue to show rapid changes in directions; will these rapid changes continue? Let’s examine the precious metal market for May 12th:
Gold and silver prices – May
Gold prices declined yesterday by 1.02% and reached 1,501$.
Silver price also fell but very sharply and reached yesterday 35.52$, a rise of 7.72%.
During May, gold price decreased by 2.5%, while silver price declined by 20.8%.
The chart below of normalized silver and gold prices (100= May 2nd) shows that they are still traded below their initial price level they started at the beginning of May.
The gold to silver ratio: As of yesterday, May 10th the ratio between gold and silver prices fell to 39.41. The ratio could be interpreted as one troy ounce (31.1 gram) of gold is worth 39.41 troy ounces of silver.
The gold to silver ratio rose very rapidly by over 23.1% during May. In the last few days, however the ratio started to decline again.
The effect of US dollar on gold and silver prices
During May, the drastic fluctuations in gold and silver prices were likely to be stimulated, in part, by the changes in the US dollar compared to major currencies.
The chart below shows the strong correlation o gold and silver prices with two major exchange rates: AUD/USD and EURO/USD.
The correlation of EURO/USD with gold and silver prices (daily percent changes) December 2010- May 2011 (up to date)
The correlation of AUD /USD with gold and silver prices (daily percent changes) December 2010- May 2011 (up to date)
The rapid changes in US dollar compared to these currencies seem to coincide with the rapid changes in gold and silver prices during May, compared to previous months.
The uncertainty in the financial markets related to the direction of the US dollar is reflected in the major commodities prices including gold and silver prices.
Ben Bernanke’s testimony today
The chairman of the Federal Reserve Ben Bernanke will testify today before the US senate. the market will keep close tabs on his testimony, and try to figure out what will be the next move of the US Fed as the quantitative easing plan will end in June;
In the quantitative easing plan the Federal Reserve printed 600 billion US dollar in the since November 2010, and purchased bonds including US government bonds in an attempt to stimulate the US economy.
Update from Middle East
See here for a more detailed update on Middle East and its effect on commodities’ markets.
Current Gold and Silver prices
In the U.S. markets, major precious metals prices are traded downward:
The current gold price, short term futures (June 2011 delivery) is traded at 1,495.4 USD / t oz. a 6$ decrease or 0.4%, as of 16.48*.
Current silver price, short term futures is at 34.245 USD / t oz – a 1.27 decline or 3.58%, as of 16.49*.
(* GMT)
The current ratio of gold to silver prices is at 43.69.
Gold and silver prices Outlook and Analysis:
The major fluctuations in gold and silver prices during recent weeks with these metals declining during last week then rising at the beginning of this week and now falling again in the last couple of days, only shows that the uncertainty in the financial markets is very high with no clear trend and probably being affected from many forces that pull the prices to different directions.
These forces include the speculation around the US dollar over the future plans of the Fed once the quantitative easing plan will end in June;
The uncertainty relate to the debt crisis in Europe; the changes in demand for gold and silver in China. These forces and many others contribute to the high volatility we currently experience in the financial markets.
I still speculate that in the short term, silver and gold prices will remain high and the current uncertainty in the currencies market will reflect in high volatility in the commodities markets.
Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):
Today
13.30 – Department of Labor report – US unemployment claims
15.00 – Ben Bernanke, Chairman of Fed, testifies
15.30 – EIA report about Natural gas storage
Tomorrow
13.30 – Report on US CPI
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For further reading (in this site):
- Weekly outlook for May 9-13
- Gold & Silver started May with sharp falls | 2-6 May
- Gold and silver prices outlook May 2011 – what’s next for gold & silver?
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