Gold and silver prices kept on rising and they are currently over the 1,500$ mark and 43$ mark respectively.
Let’s examine the news and events that might affect current gold and silver prices as of April 20th:
Is there a diminishing Australian effect on gold and silver?
Gold and silver prices keep on rising as gold price is nearing the 1,500$ mark and silver price is nearing the 43$ mark. As of yesterday April 19th, silver price has risen by 16.38%, while gold price increased by 4.63%. As a comparison, during March 2011 silver price gained 10.1% and gold price only 0.6%.
According to Mineral commodity summaries 2010, Australia was among the top countries in producing silver and during 2009 it produced 1,800 tons of silver and had over 31,000 tons of silver reserves – the seventh largest reserve worldwide. In gold, Australia had the second largest gold reserves during 2009 with over 5,800 tons (second only to South Africa).
This might explain the impotence of Australia in the precious metals markets.
During April so far, there has been a moderate positive linear correlation in the daily percent changes of silver and gold prices and AUD/USD, as seen in the chart below. These correlations have diminished in recent months, which might imply that the Australia’s effect on gold and silver has declined during April compared to December and January, when the correlations were much stronger.
The gold to silver ratio: As of Tuesday, April 19th the ratio between gold and silver prices kept on falling and reached a new low of 34.05.
The ratio could be interpreted as one troy ounce (31.1 gram) of gold is worth 34.05 troy ounces of silver.
The Chinese effect – a hypothesis
China, the world’s second largest gold consumer, also has a unique condition that might have some additional effects on gold and silver prices.
In order to slow down the rising inflation in China that reached by March 5.4% (Y2Y), Bank of China raised last month its basic interest rate to 6.31% an increase of 25 basis points.
China has pegged its currency to the USD at roughly 6.5.
In order to keep the exchange rate at its level China needed to purchase more USD because of China’s interest rate raise that could have appreciated China’s currency. Since there are many limitations on the Yuan, it makes it easier for the People Bank of China to control its currency.
These purchases of US currency might have affected not only the strength of US dollar against other currencies, but also decrease the prices of commodities including gold and silver as they are priced in US dollar. This last effect, however doesn’t seem to have any merit yet, as gold and silver keeps on rising.
Therefore, if China will continue to fight its inflation by raising its interest rate, it might further increase the prices of gold and silver.
Update from Middle East
NATO claims there is a limit to its ability to stop Qaddafi’s forces.
In the mean time to help the rebels finance their fight, the Italian government, one of the prime importers of Libyan oil has helped the rebels to sell oil and comply with the existing treaties with Italy.
Current Gold and Silver prices
European markets show major precious metals prices are traded high rises:
The current gold price, short term futures (May 2011 delivery) is traded at 1,504.5 USD / t oz. a 9.4$ increase or 0.63%, as of 10.27*.
Current silver price, short term futures is at 44.5 USD / t oz – a 0.587 increase or 1.34%, as of 10.27*.
The current ratio of gold to silver prices is at 33.8.
Gold and silver prices Outlook and Analysis:
I think we will probably continue to see rises in gold prices, as the ongoing upward trend will continue for the reasons listed above; for silver prices this upward trend will continue even more so.
Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):
9.30 Bank of England MPC meeting
15.30 – EIA report about Crude oil inventories
13.30 – Department of Labor report – US unemployment claims
15.30 – EIA report about Natural gas storage
For further reading (in this site):
- Weekly outlook for April 18-22
- Gold & Silver’s new record highs | weekly recap – 11-15 April
- Gold prices outlook for April 2011 – what’s next for gold?