Gold and silver prices, much like the Euro, hiked on Tuesday as many forex and bullion traders anticipate the ECB bond purchasing program will commence in the near future. There are also speculations on whether the People’s Bank of China will stimulate the Chinese economy. Japan’s trade balance report indicated a slowdown in Japan as the exports had declined by 8.1% during July. This news, however didn’t seem to have much on an effect on the financial markets. Currently, gold and silver prices are declining. On today’s agenda: Retails Sales Canada, Minutes of July’s FOMC Meeting, U.S. Existing Home Sales and China flash Manufacturing PMI.
Update: the recent minutes of the FOMC meeting came out: one line worth noticing:
“Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery. “
This line could indicate that the FOMC is preparing for another QE plan that will increase the money base and as a result pressure up precious metals prices.
Here is a short overview for bullion for Wednesday, August 22nd:
Precious Metals –August Update
On Tuesday, Gold hiked by 1.23% to $1,642.9; Silver also traded sharply up by 2.92% to $29.51. During August, gold rose by 1.75%; silver, by 5.73%.
As seen below, the chart shows 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 sharp rally.
The ratio between the two precious metals declined on Tuesday to 55.67. During August the ratio fell by 3.76% as gold under-performed silver.
China flash Manufacturing PMI: according to the HSBC Manufacturing PMI flash July update the Manufacturing PMI rose to 49.5, which means the manufacturing conditions are still not progressing in China; if this negative index will continue, this may adversely affect commodities prices, unless China will act to stimulate its economy;
Minutes of July’s FOMC Meeting: Following the recent FOMC meeting, in which it was decided to keep the monetary policy unchanged without introducing any additional stimulus plans, the bullion market reacted to this news – gold and silver rates declined the next day. The minutes of the FOMC meeting might add some insight behind the latest “non-decision”; it could also offer some hints as to the future steps of the FOMC in anticipation of the next month’s FOMC meeting;
Retails Sales Canada: This report may affect the Canadian dollar, which is strongly correlated with commodities prices. In the previous report regarding May, retails sales increased by 0.3%;
U.S. Existing Home Sales: This report will refer to the changes in U.S. existing home sales for July 2012; in the previous report regarding June 2012 the number of homes sold declined: the seasonally adjusted annual rate of 4.37 million home sales; if this trend will continue it may curb the rally of the U.S dollar;
Currencies / Bullion Market –August Update
The Euro/ USD hiked on Tuesday by 1.03% to 1.2473. During August (UTD) – following yesterday’s rise – the Euro/USD increased by 1.37%. Further, other currencies including Aussie dollar also appreciated on Tuesday against the USD by 0.42%. The linear correlation between gold and Euro, Aussie dollar are still strong and positive: during the month, the correlation between the gold and EURO/USD reached 0.53 (daily percent changes); between gold and AUD/USD, 0.47. Thus, if these exchange rate pairs will continue to rise against the USD, it could also pull up the prices of precious metals. Currently, the Euro/USD is trading down.
Current Gold and Silver Rates as of August 22nd
Gold (September 2012 delivery) is traded at $1,641.6 per t oz. a $2.2 or 0.14% decrease as of 05:59*.
Silver (September 2012 delivery) is at $29.43 per t oz – a $0.084 or 0.28% decrease as of 05:59*.
Daily Outlook for August 22nd
Precious metals hiked on Tuesday following the market’s optimism regarding the Euro-Zone leaders’ talks over the ECB bond purchasing program. The hike in the Euro was plausibility among the key factors pulling up gold and silver. Despite this renewed optimism the green light hasn’t been turned on yet so this rally could reach a halt until an actual announcement will be made. Today’s U.S reports including minutes of the FOMC meeting and U.S existing home sales report could affect not only the US dollar but also precious metals, as indicated above. The report on Canada’s retail sales could also have a modest effect on the Canadian dollar which is strongly linked with bullion rates. China’s manufacturing PMI report could also affect the market sentiment as to the progress of China’s economy. If this report will continue to show contraction it could adversely affect commodities prices. Finally, if the Euro and other “risk currencies” will continue to appreciate against the USD, they could rally precious metals rates.
Here is a reminder of the top events and publications that are scheduled for today and tomorrow (all times GMT):
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
09:00 – Flash German, French and Euro Area Manufacturing PMI
13:30 – U.S. Jobless Claims Weekly Report
15:00 – U.S. New Home Sales
15:30 – EIA U.S. Natural Gas Storage Update
00:30 –Bank of Australia Governor Stevens speaks
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