Gold and silver prices bounced back and rose sharply yesterday; gold and silver prices are currently traded with moderate changes. Let’s examine the precious metal market and the news related to it for today, May 19th:
Gold and silver prices – May
Gold price bounced back yesterday and inclined by 1.07% and reached 1,495$.
Silver price also inclined and reached on Wednesday 35.10$, a 4.8% incline.
Despite yesterday’s rises, during May gold price decreased by 3.9%, while silver price declined by 27.8%.
The chart below of normalized silver and gold prices (100= May 2nd) shows the downward trend of both of these metals prices at the beginning of May and during the last week both metals’ prices leveled out.
The gold to silver ratio: As of Wednesday, May 18th the ratio between gold and silver prices fell to 42.69. The ratio could be interpreted as one troy ounce (31.1 gram) of gold is worth 42.69 troy ounces of silver.
The Yen connection with gold and silver prices
There was a shift in the yen connection with gold and silver prices in recent months: as seen in the chart below, the linear correlation of the daily percent changes among gold prices, silver prices and USD/YEN exchange rate showed strong positive correlations during May.
As the US dollar depreciated against the Japanese yen during May by 0.6%, gold and silver prices also declined.
The chart also shows a change in the relationship between USD/YEN and precious metals in recent months; there was a shift from negative correlation during December 2010 to positive correlation during May.
This might suggest of the rising importance of the yen and the Japanese economy in affecting the precious metals prices. As the month will progress it will be interesting to see if this correlation will continue to hold or this finding is just noise.
Japan’s GDP declined more then expected Q1 2011
According to Bloomberg, the Yen declined sharply today due to the recent news that the Japanese GDP declined by 3.7% in annual terms at the first quarter of 2011. This figure is higher (in absolute terms) than expected by analysts and economists.
Will there be a Greek Debt restructuring? According to an interview to Bloomberg, European Central Bank Executive Board member Lorenzo Bini Smaghi says that there won’t be a restructuring of the Greek debt because this may put Europe in jeopardy. The struggles Greece along with Ireland and Portugal face in paying off their debt to ECB will continue to hang over Europe’s stability and affect its uncertainty.
Middle East, China and US News
Current Gold and Silver prices
In the European markets, major precious metals prices are traded with mixed trends:
The current gold price, short term futures (June 2011 delivery) is traded at 1,491.2 USD / t oz. a 4.6$ decrease or 0.31%, as of 10.59*.
Current silver price, short term futures is at 35.27 USD / t oz – a 0.173 incline or 0.49%, as of 10.58*.
The current ratio of gold to silver prices is at 42.27.
Gold and silver prices Outlook and Analysis:
Gold and silver prices bounced back yesterday after they had fallen during most of May. There is still high uncertainty in the market in regards to the direction of the major economies direction including Japan, US, Europe and China.
The speculation around the US dollar continues vis-à-vis the future plans of the Fed and the US government high debt of over 14.3 trillion USD – the government debt cap.
Japan’s economy continues to rebuild and recover from the damaged it endured from the tsunami attack back in March.
The same goes for the uncertainty around the debt crisis in Europe including in Greece, Ireland and Portugal;
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 these metals’ prices but no change in trend.
Here is a reminder of the top events and reports that are planed for today (all times GMT):
13.30 – Department of Labor report – US unemployment claims
15.30 – EIA report about Natural gas storage
Bank of Japan – rate decision and monetary policy statement
13.00 – Canadian Core CPI
For further reading (in this site):
- Weekly outlook for May 16-20
- Gold didn’t move | Silver kept on falling – weekly recap 9-13 May
- Gold and silver prices outlook May 2011 – what’s next for gold & silver?