Gold and silver prices sharply declined yesterday along with the Australian dollar on speculation regarding the economic growth of China and consequently Australia. Currently gold and silver price are rising. Today, Great Britain MPC Meeting Minutes will be published, U.S Existing Home Sales, Japan’s Trade balance and China flash Manufacturing PMI.
Here is a short outlook on gold and silver prices for Wednesday, March 21st:
Gold and Silver– March Update
Gold price sharply declined on Tuesday by 1.22% to $1,647; silver also sharply fell by 3.4% to $31.83. During March, gold declined by 3.76% and silver by 8.11%.
The chart below shows the downward trend of gold and silver during March (prices are normalized to February 29th).
The ratio between gold and silver slightly rose to 51.74. In the past couple of weeks the ratio ranged between 50 and 51. During the month the ratio rose by 4.73% as silver has underperformed gold. In the chart below is the upward trend of this ratio during the month.
There are reports that Greece has received a preliminary approval for a new international bailout; this positive news may help rally the Euro/USD and thus may also rally gold and silver prices;
On Today’s Agenda
China flash Manufacturing PMI: in the previous report, the HSBC Manufacturing index edged up to 49.7, but still means the PMI isn’t growing; if the index will pass the 50 mark it could mean a positive signal and thus may also positively affect commodities prices including gold and silver prices;
Japanese Trade balance: The Japanese trade balance deficit for January 2012 increased by 7.8% to 612.8 billion YEN (roughly $7.38 billion). Japan’s trade balance could provide insight into Japan’s changes in demand goods and services;
MPC Meeting Minutes: Following last month’s MPC meeting, in which it was announced the rate will remain unchanged at 0.5% and the asset purchase program will remain at £325 billion, the minutes of the recent meeting may offer some insight behind MPC policy;
U.S. Existing Home Sales: This report will refer to the February U.S. existing home sales; in the previous report regarding January the number of homes sold increased: the seasonally adjusted annual rate reached 4.57 million home sales – a 4.3% gain (for the recent existing home sales review);
U.S. Treasuries / Gold & Silver Prices – March
The U.S. 10-year Treasury yield slipped on Tuesday by 0.01 percent points to 2.38% after it had risen by 0.08 percent points a day earlier; during March the 10 year treasury yield rose by 0.40 percent point. This rally in LT securities yields may indicate that the demand for “secure investments” continue to subside. During March there was a mid-weak negative correlation between the changes in U.S. long term Treasury yield and changes in gold price. The chart below shows the development of the U.S. 10 yr yield vs. gold price during the month. This chart suggest that if the LT U.S. treasury yield will continue to increase, it may indicate that gold price will further decline.
The Euro/U.S Dollar slightly declined on Tuesday by 0.1% to 1.3225. During March Euro/U.S Dollar decreased by 0.75%; the big news came yesterday as the Australian dollar sharply fell against the U.S. dollar by 1.21%. This may have been stem by the speculation regarding the progress of China’s economy which has tremendous effect on the Australian economy. There were also reports of a potential drop in Iron Ore’s price may fall this year. Australia is the leading country in exporting Iron Ore and a drop in price could adversely affect its economy. Since the Aussie dollar is historically linearly correlated with the daily percent changes of gold and silver prices if the AUD/USD exchange rate will change direction and rally today after its sharp fall from yesterday it may indicate gold and silver may also rally. Currently, the AUD/USD is slightly rising.
Current Gold and Silver Prices March 21st
Gold (April 2012 delivery) is traded at $1,650.6 per t oz. a $3.6 or 0.22% increase as of 07:36*.
Silver (April 2012 delivery) is at $32.125 per t oz – a $0.291 or 0.91% increase as of 07:36*.
Daily Outlook and Analysis
Despite the sharp drop in precious metals prices during yesterday’s trading, which may have been stem from the speculation regarding China’s economic progress and the gold tax in India, the bullion market continues to zigzag with no clear trend in recent days. But on a monthly scale precious metal prices did take a dive. The drop in gold and silver prices may continue if the reports from Asia listed above will be negative. The upcoming U.S reports on the housing market may affect the strength of U.S dollar and consequently may indirectly affect the prices of gold and silver. On the other hand the recent developments in Europe regarding the Greek bailout may rally the Euro and thus may also trade up gold and silver.
Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):
09:30 – MPC Meeting Minutes
15:00 – U.S. Existing Home Sales
15:30 – EIA Crude Oil Stockpiles Report
00:50 – Report of Japanese Trade balance
3:30– China flash Manufacturing PMI
10:00 – Euro Area Manufacturing PMI
13:30 –Retails Sales Canada (January 2012)
13:30 – U.S. Department of Labor– Jobless Claims Weekly Update
15:30 – EIA U.S. Natural Gas Market Report
17:00 – ECB President Draghi Speaks
17:45 – Bernanke Speech
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