The bullion market has changed direction and rallied on the first day of the week after gold and silver rate plummeted last week. Will gold and silver continue to rally? The minutes of the recent RBA monetary meeting came out and showed the factors behind the latest rate cut. Tomorrow the Fed will publish the minutes of the April/May meeting. Will the Fed surprise with talks about pulling down the QE program or will it keep the asset purchase program unchanged. On today’s agenda: GB CPI and Bank of Japan Rate Decision, Outlook and Monetary Policy Statement.
Here is a short outlook for precious metals for Tuesday, May 21st:
Precious Metals – May Update
On Monday, the price of gold declined by 1.42% to $1,384.1; Silver also increased by 1.02% to $22.57. During May, gold tumbled down by 5.98%; silver, by 6.52%. Moreover, during last week, the SPDR Gold Shares (GLD) also fell by 6.11% and reached by last week to 131.07. Shares of Goldcorp Inc (GG) plummeted by 13.21% during last week.
In the chart below are the normalized rates of gold and silver for 2013 (normalized to 100 as of April 30th). The prices of gold and silver have declined in the past several weeks.
The gold and silver futures volumes of trade have rose on Monday to 293 thousand and 96 thousand, respectively. These numbers are higher than the volume traded in recent weeks. If the volume will remain high today, this could suggest the odds of sudden sharp movement in the prices of gold and silver due to high volume will increase. The chart below presents the volume of trading gold and silver futures in the CME between April and May.
GB CPI (April 2013): This report may affect the direction of the British Pound currency. In the latest report regarding March 2013, the CPI remained unchanged at an annual rate of 2.8%;
Bank of Japan – Rate Decision, Outlook and Monetary Policy Statement: Bank of Japan will publish its interest rate decision, monetary policy for June and its outlook of the Japanese economy. In the past several weeks the Japanese yen tumbled down against the USD and Euro. If BOJ will further expand its current asset purchase program, this could drag down the Yen even further;
Currencies / Bullion Market – May Update
The Euro/ USD bounced back on Monday by 0.33% to 1.2893. During the month, the Euro/USD decreased by 2.17%. Moreover, other currencies such as the Japanese yen and Aussie dollar also rallied yesterday against the U.S dollar by 0.92% and 0.42%, respectively. The appreciation of these currencies against the U.S dollar may have partly contributed to the rally of gold and silver during yesterday. The correlations among gold, Canadian dollar and Aussie dollar remained strong and robust: during April and May the linear correlation between gold and USD/CAD reached -0.64 (daily percent shifts); the linear correlation between the gold and AUD/USD was 0.67 (daily percent shifts). If these correlations will continue to stand, the path of the Aussie, Canadian dollar and Euro are likely to partly affect precious metals.
Current Gold and Silver Rates as of May 21st
Gold (short term delivery) is traded at $1,392.0 per t oz. a $7.9 or 0.57% increase as of 08:52*.
Silver (short term delivery) is at $22.70 per t oz – a 0.52% increase as of 08:52*.
This week, Bernanke is expected to testify in Congress about the U.S economic outlook. This testimony along with the minutes of the latest FOMC meeting could offer some additional insight behind the future plans of the Fed regarding the QE program. This news is likely to also affect precious metals prices so that if the FOMC minutes or Bernanke’s testimony will hint of any plans to cut down the QE program in the near future, this could adversely affect precious metals prices. In the U.S several reports will be published including: core durable goods, new and existing more sales, and jobless claims. These reports will give a sense as to the progress of the U.S economy. If these reports will show growth, they could pull up the US dollar, which could adversely bullion rates. If leading currencies such as Euro and Aussie dollar will continue to fall against the USD, they could pull down precious metals. Further, if the Indian rupee will keep depreciating against the USD, it could lower gold imports into India. Since the beginning of the year, GLD’s gold holdings has tumbled by almost 23%; if this trend will persist, it could signal the demand for gold will continue to fall. Finally, if the stock markets will continue to rally, this may adversely affect the demand for precious metals as an investment.
Here is a reminder of the top events and publications that are scheduled for today and tomorrow (all times GMT):
09:30 – GB CPI
Tentative – Bank of Japan – Rate Decision, Outlook and Monetary Policy Statement
09:30 – Minutes of MPC Meeting
09:30 – GB Retails Sales
Tentative – German 10 Year Bond Auction
11:00 – SNB Chairman Jordan’s Speech
13:30 – Canada Retails Sales
15:00 – Bernanke’s Testimony
15:00 – U.S. Existing Home Sales
19:00 – Minutes of April-May’s FOMC Meeting
02:45 – China flash Manufacturing PMI
For further reading:
- Gold and Silver Outlook for May 20-24
- Weekly Outlook of Financial Markets for May 20-24
- Will Gold Recover from its Recent Fall?
- Gold and Silver Outlook for May
- Gold and Silver Yearly Outlook For 2013