Gold and silver prices bounced back and, unlike many other commodities and currencies, rose on Monday. Despite yesterday’s rise, I still suspect bullion rates will trade down during the week. There are still talks around the future steps of ECB and People’s Bank of China vis-à-vis their intentions to issue a stimulus plan. Further, today EU leaders trying to tackle the debt crisis and perhaps issue EU bonds that will ease the debt crisis. The market seems confident EU leaders will reach an agreement that will rally the markets. Spanish bond yields are falling. Currently, gold and silver prices are hiking. On today’s agenda: Minutes Great Britain Net borrowing and the Japanese Trade balance.
Here is a short overview for bullion for Tuesday, August 21st:
Precious Metals –August Update
On Monday, Gold rose again by 0.22% to $1,623; Silver changed direction and also traded up by 2.1% to $28.68. During August, gold rose by 0.52%; silver, by 2.74%.
As seen below, the chart presents the changes of normalized prices of precious metals in the last several weeks (normalized to 100 as of July 31st). During recent days, both precious metals had a moderate upward trend.
The ratio between the two precious metals increased on Monday to 57.66. During August the ratio edged down by 0.31% as gold slightly under-performed silver.
On Today’s Agenda
Great Britain Net borrowing: this report will present the monthly developments in the public sector net borrowing for July; as of June, the net borrowing declined to £12.1 billion;
Japanese Trade balance: The Japanese trade balance deficit for June fell by 51.4% compared to a deficit of 300 billion YEN (roughly $3.79 billion). This fall is due to the drop in imports by 6.5%, and despite the decline in exports by 1.4%. Japan is among the leading importing countries of commodities, including gold; its trade balance could provide some information about Japan’s shifts in demand goods and services;
Currencies / Bullion Market –August Update
The Euro/ USD edged up on Monday by 0.09% to 1.2346. During August (UTD) the Euro/USD nearly didn’t changed as it edged up by 0.34%. Further, other currencies including Aussie dollar also and CAD also appreciated on Monday against the USD by 0.24% and 0.05%, respectively. The linear correlation between gold and Euro, AUD are still robust and positive: during recent months, the correlation between the gold and EURO/USD was 0.48 (daily percent changes); between gold and AUD/USD, 0.51. Thus, if these exchange rate pairs will continue to appreciate against the USD, it could also pull up the prices of precious metals.
Current Gold and Silver Rates as of August 21st
Gold (September 2012 delivery) is traded at $1,625.2 per t oz. a $2.2 or 0.14% increase as of 07:15*.
Silver (September 2012 delivery) is at $28.8 per t oz – a $0.122 or 0.43% increase as of 07:14*.
Daily Outlook for August 21st
Precious metals bounced back on the first day of the week and thus continued their modest rally of recent days. I still suspect that precious metals will eventually resume their moderate downward trend in the near future, but for now the renewed hope that EU leaders will reach an agreement on how to tackle the EU debt crisis – so that ECB will eventually announce of a stimulus plan in the near future - is pulling up the markets. Tomorrow’s FOMC might disappoint (again) bullion traders that will result in another fall precious metals rates. Today’s publication of the Great Britain Net borrowing the Japanese Trade balance might affect each country’s respective foreign exchange rate, which, in turn could also affect bullion rates Finally, if the Euro and other “risk currencies” will continue to depreciate against the USD, they could also contribute to the downward trend of precious metals rates.
Here is a reminder of the top events and publications that are scheduled for today and tomorrow (all times GMT):
09:30 – Great Britain Net borrowing
00:50 – Japanese Trade balance
13:30 –Retails Sales Canada
15:00 – U.S. Existing Home Sales
15:30 – U.S Crude Oil Stockpiles Report
19:00 – Minutes of July’s FOMC Meeting
03:30– China flash Manufacturing PMI
For further reading: