The rapid rises in gold and silver prices in the last few days start to resemble rises that were back in April. Will this recent rally continue in the following days to come or will it dissipate soon? currently gold and silver prices are traded with moderate falls. Let’s examine the precious metals market for today, May 26th:
Gold and silver prices – May
Gold price inclined yesterday for the fourth straight business day by 0.30% as it reached 1,527$ – the highest price level since May 3rd.
Silver price also inclined, even more than gold price by 4.19% to 37.642$ and thus it completed within seven business days a 12.4% rally.
During May, gold price decreased by 1.8%, while silver price declined by 22.5%.
The chart below of normalized silver and gold prices (May 2nd 2011=100) shows the rapid rises in silver price during the last three of days despite the sharp fall at the beginning of the month.
The gold to silver ratio: As of Wednesday, May 25th the ratio between gold and silver prices declined to 40.59 – since the beginning of May this ratio inclined by 26.7%, but since May 17th this ratio fell by 8.2%. This means that silver started to outperform again gold in the last few days.
The chart below shows that this ratio had a rapid upward trend that has seem to change direction in the last few days.
Gold and silver prices and major currencies
During May, gold and silver prices were highly correlated with major currencies, mainly to USD/CAD, USD/YEN and AUD/USD.
The chart below shows the strong correlation of gold and silver prices (daily percent changes) to these exchange rates.
Australia and Canada are among the leading exporters of gold and silver, and Japan is among the leading countries in importing gold and silver.
The rapid fall of gold and silver prices at the beginning of May seem to coincide with the strengthening of the US dollar compared to these above mentioned currencies.
During the recent rally of silver and gold prices, between May 17th and May 25th as they inclined by 12.39% and 3.23%, respectively; the USD/CAD exchange rate also inclined by 0.53%; AUD/USD fell by 1.36%; and USD/YEN rose by 0.68%. These figures don’t coincide with the correlations listed above, except for the USD/Yen exchange rate and the upward trend of gold and silver prices in recent days.
This might suggest that gold and silver prices’ rally in the last few days was stem, in part, by the recent rally of US dollar compared to Yen.
Goldman Sachs and JP Morgan bullish on commodities
According to Bloomberg, Goldman Sachs and JP Morgan are go long on major commodities including crude oil and gold.
These recommendations are probably among the reasons for gold and silver prices’ rally during the week.
Europe
One of the main concerns that might be responsible to the high gold and silver prices is the investors’ concerns over the debt crisis in Europe, in particular, according to Bloomberg, the questions about restructuring the Greece’s debt.
This news puts additional pressure on Europe and raises its level of risk; usually in times like theses, when the uncertainty rises, major commodities, such as gold, strive.
Current Gold and Silver prices
Major precious metals prices are traded down in the European markets:
The current gold price, short term futures (June 2011 delivery) is traded at 1,525.8 USD / t oz. a 2$ decrease or 0.13%, as of 14.00*.
Current silver price, short term futures is at 37.44 USD / t oz – a 0.202 decline or 0.54%, as of 14.01*.
The current ratio of gold to silver prices is at 40.73.
The EURO/USD is traded up at 1.4173 a 0.60% rises as of 09.45*.
The USD/CAD is traded up at 0.9777 a 0.0307% rises as of 09.45*.
The AUD/USD is traded up at 1.0594 a 0.5925% rises as of 09.45*.
(* GMT)
Gold and silver prices Outlook and Analysis:
Gold and silver prices are traded up in the last few days despite the rapid falls they had at the beginning of the month.
The renewed interest of major investments banks such as Goldman Sachs and JP Morgan in commodities including crude oil and gold might be among the main reasons for the recent rally in gold and silver in the last several days. This affect might continue to drive gold and silver price in during the next days, however, I still think, this rally won’t last long unless there will be news coming from the US that will devalue its currency again, a plan like the QE1 and QE2 will get it done and rekindle traders and investors enthusiasm over gold and silver.
Currently, the concerns over the debt crisis in Europe including Greece and Portugal give the US dollar some wind and keep it high; as a result, gold and silver prices are likely to remain around the 1,500$-1520$ and 34$-37$, respectively in the following days.
Here is a reminder of the top events and reports that are planed for today (all times GMT):
Today
13.30 – Department of Labor report – US unemployment claims
13:30– US GDP 1Q 2011 report
15.30 – EIA report about Natural gas storage
Tomorrow
09.00 – Monetary developments in the Euro area
15.00 –US pending home sales
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