Gold and silver prices finished last week with rises, only after they shifted directions throughout most of the week. Currently gold and silver prices are traded with moderate changes. Let’s examine the news related to these precious metals for today, May 23rd:
Gold and silver prices – May
Gold price finished last week with a 1.11% rise as it reached 1,508$.
Silver price also inclined and reached on Friday 35.09$, a 0.44% incline.
During May gold price decreased by 3.1%, while silver price declined by 27.8%.
The chart below of normalized silver and gold prices (100= May 2nd) shows the downward trend of gold and silver prices at the first few days of May.
The gold to silver ratio: As of Friday, May 20th the ratio between gold and silver prices inclined to 43. The ratio could be interpreted as one troy ounce (31.1 gram) of gold is worth 43 troy ounces of silver.
Australian Dollar / US dollar and gold and silver prices
During May, gold and silver prices were very highly correlated with AUD/USD and reached similar levels as in January 2011, when gold prices fell, back then, by 6.2% and silver prices by 9.5%.
The chart below shows the strong correlation of gold and silver prices (daily percent changes) with AUD/USD during May.
Australia is among the leading countries in producing gold, and during the last quarter of 2010, Australia was the leading country in gold production growth.
The S&P500 gold and silver prices during May
There is also very strong linear correlation between the S&P500 daily percent changes and gold and silver prices as presented in the chart below:
The correlation between S&P500 and gold and silver prices didn’t reach such high correlation in previous months, and may indicate a shift in direction of the relationship between these indexes.
European debt crisis
Following the recent news from Portugal about its debt crisis, in which Portugal is to receive from IMF and European Union 111 billion USD, the government is determined to slash its budget and make reforms in the country. 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.
People bank of China raised its reserve requirements ratio of commercial banks in China by 0.5 percent points to 21%. This move came after, the Chinese inflation continue to rise during April, in part, due to the high volume loans the commercial banks hand out. This recent raise might curb the number of loans given and eventually might slow down the annual economic growth of China. If this will be the case, it may curb China’s demand for gold and silver.
Current Gold and Silver prices
Major precious metals prices are traded with moderate falls in the European markets:
The current gold price, short term futures (June 2011 delivery) is traded at 1,508.6 USD / t oz. a 0.3$ decrease or 0.02%, as of 10.53*.
Current silver price, short term futures is at 34.685 USD / t oz – a 0.402 decline or 1.15%, as of 10.53*.
The current ratio of gold to silver prices is at 43.47.
Gold and silver prices Outlook and Analysis:
Gold and silver prices inclined on the last day of last week, probably due to the concerns over Portugal’s debt.
Major commodities including gold and silver continue to fluctuate with no clear direction in last couple of weeks. The Market is probably waiting for news from the US in regards to the Fed’s next move in stimulating the US economy as the quantitative plan is about to end in June.
The US economy continues to pose concerns including the high public debt of over 14.32 trillion US dollar, which is nearly 98% of US’s GDP in 2010; the slow recovery of US economy.
In the mean time, I still speculate that gold and silver prices will fluctuate around their current price level of 1,500$ and 35$, respectively; as they did in the past couple of weeks.
Here is a reminder of the top events and reports that are planed for today (all times GMT):
06.00 – Bank of Japan monthly report
23.50 – Report of Japanese Trade balance (for April)
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?