Gold and silver prices slowed down their rally as gold price rose by only 0.18% during this week and silver price by only 0.51% The U.S. debt ceiling continues to occupy the financial news – today a bill proposed by Boehner to cut US deficit will be voted in the House; the forex and commodities markets already seem to have incorporated the uncertainty from US debt news as they didn’t change much in recent days. Currently, gold and silver prices are trade down on the weak Euro. Today, the U.S. unemployment claims report will be published and the US pending home sales.
Let’s examine the precious metals market for today, July 28th:
Gold and silver prices –July
Gold price moderately declined yesterday, July 27th by 0.12% to $1,617. Gold price slowed down in recent days and following Monday’s increase, gold price didn’t change much afterwards.
Silver price also declined by 0.32% to $40.57. Silver price only inclined by 0.51% during the past three days.
During July, gold price increased by 7.6%, and silver price inclined by 16.5%.
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 remained nearly unchanged in the last few days; yesterday, July 27th the ratio moderately inclined by 0.2% to 39.87 – the lowest ratio level since May 10th. Nevertheless, during July silver price has outperformed gold price as the ratio fell by 7.6%.
US Dollar / Gold & silver prices – July update
The Euro to US dollar exchange rate continues to zigzag and yesterday it fell by 0.99%; during July this exchange rate fell by 0.9%.
The talks in the Washington over the US debt ceiling might continue to affect the US dollar, even though there is no clear trend in recent days for the US dollar.
Furthermore, as seen in the chart below, of the linear correlations of the daily percent changes between precious metals prices (gold and silver prices) and Euro to US dollar exchange rate. During June the correlations were positive and strong, but in the July (UTD) the correlation of gold price and Euro to US dollar shifted direction and was negative for the first time in 2011. This shows that the relation between Euro to US dollar and precious metals isn’t the same it was in previous months; furthermore, the high increase in gold and silver prices doesn’t seem related to the changes in the Euro to US dollar.
US debt ceiling – voting to cut deficit
The current update is that later today there will be a vote in the House of Representatives on a bill to cut the budget deficit; the bill was proposed by Speaker of the house Boehner. If this bill will pass, it might move the current stalemate in Washington between Republicans and Democrats over raising the debt ceiling. On the other hand, President Obama said if the bill will pass he will veto it. 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 continue to claim that even if US will reach an agreement on raising 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 down in the US market:
The current gold price short term future (August 2011 delivery) is traded at $1,610.2 per t oz. a $7.1 decrease or 0.44% as of 15:49*.
Current silver price, short term futures is at $39.740 per t oz – a $0.828 decline or 2.04%, as of 15:48*.
The current ratio of gold to silver prices is at 40.51.
(* GMT)
Gold and silver prices Outlook:
Gold and silver prices started to slow down and during the past three days didn’t change much, probably because the market is waiting for the conclusion of the US debt ceiling talks. It could also mean that the market has already priced in the uncertainty vis-à-vis the US debt into the gold and silver prices. Unless there will be any breaking news today, gold and silver prices are likely to moderately change throughout the day and continue its upward trend.
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 – U.S. unemployment claims
15:00 – U.S. pending home sales
15:30 – EIA report about Natural gas storage
Tomorrow
10.00 – Euro Area annual inflation (July)
13:30 – Canada GDP by industry
13.30 – Bureau of Economic Analysis – US second quarter advance GDP
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Lior Cohen, M.A. commodities analyst and blogger at Trading NRG