Is time for another quantitative easing? Gold and silver prices continue to rise following yesterday’s publication of the minutes of the FOMC meeting. In last month’s FOMC meeting there were no hints of another QE program, but the minutes revealed that many FOMC members think “ monetary accommodation would likely be warranted fairly soon”. This news is likely to shift market sentiment and keep precious metals prices rising. Currently, gold and silver prices are hiking. On today’s agenda Flash Euro Area Manufacturing PMI, U.S. Jobless Claims, and Bank of Australia Governor Stevens speaks.
Here is a short overview for bullion for Thursday, August 23rd:
Precious Metals –August Update
On Wednesday, Gold edged down by 0.15% to $1,640.5; Silver traded up by 0.43% to $29.64. During August, gold rose by 1.6%; silver, by 6.19%.
As seen below, the chart presents the shifts 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 upward trend.
The ratio between the two precious metals declined again on Wednesday to 55.35. During August the ratio decreased by 4.32% as gold under-performed silver.
On Today’s Agenda
Flash Euro Area Manufacturing PMI: In the previous report regarding July 2012, the Euro Zone Manufacturing PMI declined to 44.1. This report will provide an indicator to the progress of the Euro zone and its leading economies’ manufacturing conditions; this news, in turn, might affect the Euro/USD currency pair and consequently also bullion rates;
U.S. Jobless Claims Report: in the previous update the jobless claims rose by 2k to 366,000; this upcoming weekly report may affect the U.S dollar and consequently commodities rates;
U.S. New Home Sales: in the previous report the sales of new homes fell to an annual rate of 350,000 – a 8.4% drop (month over month); if the number of home sales will continue to fall, it may further indicate a sign of little recovery, if at all, in the U.S real estate market which may also affect the strength of the US dollar;
Bank of Australia Governor Stevens speaks: Following the recent rate decision, Governor Stevens of Bank of Australia will give a speech; if the speech will reveal the future plans of the Bank vis-à-vis its monetary policy and the Bank’s future steps it could affect the Aussie dollar, which is strongly correlated with precious metals rates;
Currencies / Bullion Market –August Update
The Euro/ USD rose again on Wednesday by 0.45% to 1.2529. During August (UTD) the Euro/USD traded up by 1.83%. Further, other currencies including Aussie dollar also appreciated on Wednesday against the USD by 0.17%. The linear correlation between gold and Euro, Aussie dollar are still strong and robust: during August, the correlation between the gold and EURO/USD reached 0.52 (daily percent changes); between gold and AUD/USD, 0.473. Thus, if these currencies pairs will continue to rally against the USD, it could also pressure up the prices of precious metals. Currently, the Euro/USD is trading up.
Current Gold and Silver Rates as of August 23rd
Gold (September 2012 delivery) is traded at $1,666.7 per t oz. a $26.2 or 1.6% increase as of 06:39*.
Silver (September 2012 delivery) is at $30.425 per t oz – a $0.784 or 2.64% increase as of 06:39*.
(* GMT)
Daily Outlook for August 23rd
Precious metals didn’t do much on the NYMEX market on Wednesday but they are currently rising and are likely to continue this upward trend throughout the rest of the day. The minutes of the FOMC meeting rekindled the hopes that the Fed will issue another quantitative easing plan. It’s not certain how this QE will help the U.S economy because it seems there is a diminishing return with each quantitative easing program. Nonetheless, this program is likely to help rally gold and sliver as both QE1 and QE2 did in recent years. The ongoing rise in the Euro is likely to keep pulling up gold and silver. Today’s U.S reports including U.S new home sales report and jobless claims could affect not only the US dollar but also precious metals, as indicated above. The report on EU manufacturing PMI could also have a modest effect on the Euro which is strongly linked with bullion rates.
Here is a reminder of the top events and publications that are scheduled for today and tomorrow (all times GMT):
Today
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
Tomorrow
09:30 – GB revised GDP Q2 2012
13:30 – U.S Core Durable Goods
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