Gold and silver prices continue to moderately incline as the uncertainty around the raising of the U.S. debt ceiling continues to occupy the financial news. Currently, gold and silver prices are trade with moderate changes. Today, the U.S. durable goods report will be published and the Euro Area Monetary development report.
Let’s examine the precious metals market for today, July 27th:
Gold and silver prices –July
Gold price continued to rise and finished yesterday, Tuesday July 26th with a 0.30% increase to $1,619. This is the highest price level in 2011 so far.
Silver price also inclined by 0.83% to $40.70 – the highest price level since May 3rd, 2011.
During July, gold price increased by 7.8%, and silver price inclined by 16.8%.
The chart below shows the normalized gold and silver prices (June 30th 2011=100).
The gold to silver ratio: the ratio between gold and silver prices didn’t change much in the last couple of days; yesterday, July 26th the ratio moderately declined by 0.5% to 39.79 – the lowest ratio level since May 10th. During July silver price has outperformed gold price as the ratio fell by 7.8%.
That being said, the correlation between gold and silver prices (daily percent changes) remains robust and strong during July.
US Dollar / Crude oil / Gold & silver prices – July update
The Euro to US dollar exchange rate inclined yesterday by 0.93%; during July this exchange rate rose by 0.1%.
In the next few days we might continue to see the US dollar depreciating against major currencies due to the concerns over the US debt ceiling; this might further strengthen gold and silver, although there is weaker correlation between US dollar and gold and silver prices in July compared to previous months.
Furthermore, during July there are very weak correlations between crude oil prices (WTI spot oil daily percent changes) and gold and silver prices, compared with the strong correlations they had in previous months. This might indicate that gold and silver prices are driven by speculation than other factors such as depreciation of US dollar.
US debt ceiling – still a stalemate
The talks over raising the U.S. debt ceiling remains deadlocked as Republicans dig their heels and remain adamant in not giving in to President Obama’s demand to raise U.S. debt ceiling. According to Reuters Obama could bypass Congress and continue to borrow without raising the debt ceiling; nevertheless, President Obama stated that he won’t borrow more funds without the approval of Congress.
The deadline before the US is expected to default on its debt is August 2nd.
Major rating agencies such as Moody’s Investors Service, Standard & Poor’s and Fitch Ratings claimed that even if US will reach an agreement to raise the debt ceiling in due time, it doesn’t guarantee they won’t downgrade US’s AAA credit rating.
Current Gold and Silver prices
The precious metals prices are currently traded with mixed trend in the U.S. market:
The current gold price short term future (August 2011 delivery) is traded at $1,618.1 per t oz. a $1.2 decrease or 0.07% as of 17:17*.
Current silver price, short term futures is at $40.72 per t oz – a $0.022 incline or 0.05%, as of 17:17*.
The current ratio of gold to silver prices is at 39.73.
Gold and silver prices Outlook:
Gold and silver prices continue their upward trend they have had during most of July. There rises aren’t only due to the weak US dollar, but might also be driven by speculation. If the US debt ceiling talks won’t resolve soon, this might further weaken the US dollar, and drive investors to commodities mainly precious metals; consequently, this might further drive up gold and silver prices in the following days.
Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):
09.00 – Monetary developments in the euro area
13:30 – US Department of Commerce – Report on Durable Goods
15:30 – EIA report about Crude oil inventories
13:30 – Department of Labor report – U.S. unemployment claims
15:00 – U.S. pending home sales
15:30 – EIA report about Natural gas storage
For further reading:
Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.