Gold and silver prices continue to fall for the fourth straight day, today the falls are probably driven by the strengthening of the US dollar compared to major currencies; let’s see what is up a head in the precious metal market for today, May 5th:
Gold and silver prices – May
Gold prices reached yesterday 1,515$ a decline of 1.63%, while silver price reached 39.39$ a drop of 7.51%.
During May, silver price decreased by 19%, while gold price decreased by 2.6%. Notice as seen in the chart below, in normalized terms (100= April 1st) silver prices declined to a similar level gold prices are currently at.
The gold to silver ratio: As of yesterday, May 4th the ratio between gold and silver prices rose to 38.47. The ratio could be interpreted as one troy ounce (31.1 gram) of gold is worth 38.47 troy ounces of silver.
The gold to silver ratio rose very rapidly by over 20% during May. This shift in trend is the first one in 2011.
The effect of the increase in Silver Margins
CME Group raised the margin requirements on silver trading at the beginning of the week. This was the second margin increase within a week’s time. Under the recent terms the minimum amount needed to deposit will be 16,200$ per contract, an increase of 11.6% from the pervious amount needed. The ramifications of that announcement seem very clear as silver prices, as presented above deseeded very precipitately during the week.
The Fed chairman’s speech
Ben Bernanke is set to speak today. The title of his speech is “Implementing a Macro prudential Approach to Supervision and Regulation “.
In this speech, he might also refer to the progress of the US economy and the stimulus plan that Fed is implementing. During last week, the news about the US economy’s slowdown and the Fed’s pledge to continue the quantitative easing plan might have be among the reasons for the rapid increase in gold and silver prices by the end of last week.
The US dollar
As presented in the monthly analysis about gold and silver prices, the weak dollar compared to major currencies probably contributed to the rise in gold and silver during April, but currently the US dollar picks up and rises compared to major currencies including EUR and AUD. This recent change probably contirbutes to the dramatic falls in gold and silver prices today.
The news on the demise of Bin Laden
The news on the killing of head of al-Qaida – Osama Bin Laden continues to occupy the news in the following days to come. The initial reaction to this breaking news on the financial markets and major commodities markets dissipated and currently the financial markets seem stabilize and are now being affected by other factors.
Update from Middle East
Currently most of the Libyan fighting takes place in the rebel-held city of Misrata where Gaddafi’s forces continue to strike the rebels.
Current Gold and Silver prices
USmarkets show major precious metals prices are traded at rapid falls:
The current gold price, short term futures (June 2011 delivery) is traded at 1,483.3 USD / t oz. a 32$ decrease or 2.11%, as of 17.28*.
Current silver price, short term futures is at 36.55 USD / t oz – a 2.838 decline or 7.21%, as of 17.28*.
The current ratio of gold to silver prices is at 40.5.
Gold and silver prices Outlook and Analysis:
The free-fall of silver prices seems to continue today as silver and gold prices are traded at a rapid declines, which might slow down throughout the day. The correction made to silver prices with the increase in of CME margin might be over soon, but the correction to the strengthening of the US dollar progresses as gold and silver prices are downgraded.
Here is a reminder of the top events and reports that are planed for today (all times GMT):
13.30 – Department of Labor report – US unemployment claims
14.30 – Ben Bernanke, Chairman of Fed, speaks
15.30 – EIA report about Natural gas storage
12.00 – Canada unemployment rate report
13.30 – US unemployment rate report & non-farm employment change
For further reading (in this site):