Gold and silver prices remained unchanged in recent days: during the first couple of weeks of July (1st to 18th of July), gold price rose by 8.08% and silver price inclined by 19.69%; on the other hand, during this week (July 25th to 28th), gold price rose by only 0.11% and silver price declined by 1.4%. This slowdown might continue until the cards will fall on the matter of the debt ceiling talks in the US. In the mean time the forex and commodities prices don’t move much. Currently, gold and silver prices are trade down. Today, the Euro Area inflation rate will be published, the U.S. advance estimate of second quarter of GDP and Canada’s GDP by industry (update: US GDP grew by 1.3%; see here for more).
Let’s examine the precious metals market for today, July 29th:
Gold and silver prices –July
Gold price moderately declined yesterday, July 28th by 0.07% to $1,616. Gold price slowed down in recent days and following Monday’s increase, gold price didn’t change much afterwards.
Silver price also declined by 1.91% to $39.79.
During July, gold price increased by 7.5%, and silver price inclined by 14.2%.
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 moderately inclined yesterday, July 28th by 1.9% to 40.61. During July silver price has outperformed gold price as the ratio fell by 5.9%.
US GDP second quarter
This report will show the GDP growth rate of the US economy during the second quarter of 2011. During 1Q 2011 the annual growth rate was 1.9% growth – a drop from a 3.1% annual growth rate during 4Q 2010; The early speculations are that this second quarter GDP growth rate won’t show any large improvement from the first quarter, and it may just increase around the 1.5 -2.0% annual growth rate. If there will be an increase in growth rate above expectations it might strengthen the US dollar and consequently weaken gold and silver prices.
This report regards growth in major industrial sectors for May 2011. In the previous report pertaining April 2011, the real gross domestic product remained unchanged after it had risen by 0.3% during Match 2011. During April 2011, the Manufacturing decreased by 0.7%, but the construction activity edged up by 0.1%. This report could affect the strength of Canadian dollar and consequently major gold and silver prices that are strongly correlated with this exchange rate.
Euro Area Inflation rate
Despite the recent raise in Euro Area interest rate to 1.5% on July 13th; there are still some concerns regarding the inflation in Euro Area, mainly in Germany. In the last report regarding the inflation rate in June 2011, the annual inflation rate remained at 2.7% for Euro Area. There are expectations that in the upcoming report of July 2011 there will be little change in the CPI. If there will be surprises in this report it could affect the Euro.
US Dollar / Gold & silver prices – July update
The Euro to US dollar exchange rate declined again yesterday by 0.24%; during July this exchange rate fell by 1.2%. The US dollar also moderately appreciated against other currencies including the AUD. Despite the strong correlation major exchange rates (e.g. Euro to US dollar) had with precious metals prices, during July there is little evidence to support that the rally of gold and silver prices were driven by the change in US dollar.
US debt ceiling – the debacle continues
Republicans will try to revive their plan to pass a budget deficit cutting bill today, after they had failed to round up enough support to pass it yesterday. 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 European market:
The current gold price short term future (August 2011 delivery) is traded at $1,613.3 per t oz. a $2.9 decrease or 0.18% as of 08:23*.
Current silver price, short term futures is at $39.380 per t oz – a $0.414 decline or 1.04%, as of 08:24*.
The current ratio of gold to silver prices is at 40.95.
Gold and silver prices Outlook:
Gold and silver prices didn’t change much during the week, but as we are existing July, we might see more trading that could be translated to sharper changes in the gold and silver prices; perhaps gold and silver prices will trade down as traders might seek to cash out from the sharp rises in gold and silver during the first half of July. The market still awaits the conclusion of the US debt ceiling debacle. The US GDP report might also push gold and silver prices down if the GDP growth rate will beat expectations.
Here is a reminder of the top events and reports that are planed for today (all times GMT):
10.00 – Euro Area annual inflation (July)
13:30 – Canada GDP by industry
13.30 – Bureau of Economic Analysis – US second quarter advance GDP
For further reading:
Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.