Gold and silver prices changed direction and declined on Wednesday. Their fall coincided with the appreciation of the US dollar against leading currencies including Euro and Canadian dollar. IN his testimony in front of Congress, Bernanke reminded that the Fed won’t taper QE3 until the U.S economy will show clear signs of progress. In the mean time, the housing market in the U.S is cooling down: housing starts fell by 9.9% during June compared to May; building permits declined by 7.5% compared to May’s rate. Will gold and silver bounce back today? On today’s agenda: Bernanke’s Testimony, GB Retails Sales, Spanish 10 year bond auction, U.S. jobless claims, Philly Fed Manufacturing Index.
Here is a short outlook for precious metals for Thursday, July 18th:
Gold and Silver Prices Review – July Update
On Wednesday, gold changed direction and fell by 1% to $1,277.5; Silver also sharply decreased by 2.58% to $19.41. During July, gold rose by 4.39%; silver slipped by 0.20%.
In the chart below are the normalized rates of gold and silver for 2013 (normalized to 100 as of June 18th). The prices of gold and silver haven’t recovered from their tumble at the end of June.
See here the weekly outlook of gold and silver for July 15-19.
On Today’s Agenda
Bernanke’s testimony in Senate: Bernanke will testify again, this time in the U.S. Senate before the Committee on Banking, Housing, and Urban Affairs. The title of his testimony hasn’t changed – “Semiannual Monetary Policy Report to the Congress”. In his recent testimony in Congress, Bernanke emphasized the importance of the recovery of the U.S before the Fed could start to ease down its asset purchase program. Nonetheless, Bernanke’s remarks from last week helped pull up gold and silver prices. If the upcoming testimony will change the current market expectations regarding the FOMC’s next move regarding its asset purchase program, this could affect silver and gold prices;
GB Retails Sales: This report will show the changes in the retails sales in Great Britain for June 2013. It may affect the path of the British Pound currency. In the previous report regarding May 2013, retails sales changed direction and rose by 2.1%;
Spanish 10 Year Bond Auction: Spain will issue its monthly with bond auction; in the last bond auction, which was held at the middle of June, the average rate rose to 4.77% – the highest rate since March 2013;
U.S. Jobless Claims Weekly Report: in the last report the jobless claims bounced back by 16k to reach 344k; the next weekly report may affect the U.S dollar and consequently bullion prices;
Philly Fed Manufacturing Index: In the last survey regarding June, the growth rate bounced back from -5.2 in May to +12.5 in June. If the index will continue to rally, it may positively affect not only U.S Dollar but also U.S equity markets and commodities (the previous Philly Fed review);
Currencies / Bullion Market – July Update
The Euro/ USD currency pair also changed direction and fell on Wednesday by 0.28% to 1.3125. During July, the Euro/USD increased by 0.88%. Moreover, other currencies such as the Canadian dollar also depreciated yesterday against the U.S dollar by 0.34%. The correlations among gold, Euro and Canadian dollar strengthened in recent weeks, e.g. the correlation between the CAD/USD and silver price is -0.56. If these correlations will continue to strengthen, the currencies pairs CAD/USD, Euro/USD and USD /Japanese yen are likely to affect gold and silver prices. The chart below shows the linear correlations among precious metals percent changes and leading currencies pairs.
Gold (short term delivery) is traded at $1,276.70 per t oz. a $2.1 or 0.16% decrease as of 07:11*.
Silver (short term delivery) is at $19.27 per t oz – a 0.80% decrease as of 07:11*.
Here is a reminder of the top events and publications that are scheduled for today and tomorrow (all times GMT):
09:30 – GB Retails Sales
Tentative – Spanish 10 Year Bond Auction
13:30 – U.S. Jobless Claims
15:00 – Bernanke’s Testimony
15:00 – Philly Fed Manufacturing Index
13:00 – Canada’s core CPI
All Day (two days) – G20 Summit
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