The prices of gold and silver bounced back on Wednesday. Their rally didn’t coincide with the depreciation of the Euro and other risk related currencies against the USD. Will gold and silver continue to rise? Currently gold and silver prices are increasing. On today’s agenda: ECB Rate Decision, Swiss National Bank Foreign Currency Reserve, Bank of England Rate Decision, Great Britain Manufacturing Production, U.S. Jobless Claims, RBA Monetary Policy Statement, China’s Trade Balance, Japan Current Account, French 10 Year Bond Auction.
Here is a short outlook for precious metals for Thursday, February 7th:
Precious Metals – February Update
On Wednesday, the price of gold inched up by 0.32% to $1,678.1; Silver price remained virtually unchanged at $31.88. During the month, gold increased by 1.05%; silver, by 1.73%.
As seen below, the chart presents the shifts in the normalized prices of precious metals in recent weeks (normalized to 100 as of December 31st). During January, the prices of silver and gold have had an unclear trend.
The ratio between the two precious metals slipped on Wednesday to 52.48. During the month, the ratio declined by 0.97% as gold slightly under-performed silver.
The gold and silver futures volumes of trade have declined again on Wednesday to 106 thousand and 31 thousand, respectively. These numbers are the lowest for the month so far. The volume might pick up today on account of the many news items that are today’s agenda. Nonetheless, if the volume will remain low, this could suggest the prices of gold and silver will remain with little change, as they did during the week. The chart below shows the volume of trading gold and silver futures in the CME in January and February.
Swiss National Bank Foreign Currency Reserve: The Bank will publish its current Foreign Currency Reserve; according to the previous update, the forex reserves rose compared to the previous week;
Great Britain Manufacturing Production: this report will show the yearly rate of GB’s manufacturing production for December; in the previous report regarding November the index decreased by 0.3% (M-2-M); this news may affect the British Pound;
French 10 Year Bond Auction: the French government will have monthly bond auction; in the latest bond auction, which was held during the first week of January, the average rate reached 2.07% – the lowest rate in recent months;
Bank of England Rate Decision: Bank of England will announce its basic rate for February 2013 and of any developments in its asset purchase plan; as of January BOE kept rate unchanged at 0.5% and the asset purchase plan was left at £375 billion;
ECB Rate Decision: Back in July 2012 the ECB lowered its cash rate by 0.25pp to 0.75%. Since many continue to speculate if the ECB lower the rate again because: the economic situation in EU isn’t improving. Therefore, the ECB might lower the rate by another 0.25pp in the near future. If ECB will cut the rate again, it may pull down the Euro to US dollar exchange rate;
U.S. Jobless Claims: in the latest report the jobless claims rose by 38k to reach 368k; this upcoming weekly report may affect the U.S dollar and consequently commodities;
Japan Current Account: this report will show the shifts in the difference between exports and imports for Japan during the previous month; this news may affect the strength of the Yen;
Reserve Bank of Australia – Monetary Policy Statement: The RBA will publish its quarterly report regarding the Bank’s monetary policy;
China’s Trade Balance: as of the latest monthly report, China’s trade balance rose to a $31.6 billion surplus; if the surplus will further rise, it could indicate that China’s economic growth is progressing and thus may positively affect prices of precious metals.
Currencies / Bullion Market – February Update
The Euro/ USD changed direction and fell on Wednesday by 0.43% to 1.3524. During the month, the Euro/USD inched down by 0.41%. The Aussie dollar also depreciated against the USD by 0.67%. Some currencies such as Aussie dollar and yen remained virtually unchanged yesterday against the USD. The downward trend in the forex markets in which the Euro and Aussie dollar fell may have influenced precious metals traders. The correlations among gold, Canadian dollar and Aussie dollar were mid-strong in recent weeks: during January/February, the linear correlation between gold and USD/CAD reached -0.32 (daily percent changes); the linear correlation between the gold and AUD /USD reached 0.43 (daily percent changes). From these correlations we might infer the recent changes of gold and silver were partly affected or resulted from the shifts in the foreign exchange markets. If the Euro and other risk currencies will appreciate again against the USD, they might pull up gold and silver.
Current Gold and Silver Rates as of February 7th
Gold (short term delivery) is traded at $1,681.1 per t oz. a $2.3 or 0.14% increase as of 06:30*.
Silver (short term delivery) is at $31.89 per t oz – a $0.01 or 0.01% increase as of 06:30*.
Daily Outlook for February 7th
Prices of gold and silver rallied yesterday but remained slightly changed form the beginning of the week. The low volatility coincided with the low volume of trading in the precious metals markets in the CME. The upcoming rate decisions of ECB and BOE might stir up the forex and commodities prices if any of these central banks will decide to lower their rates or expand their asset purchase program (in the case of BOE). My guess, however, is that these central banks will keep their policy unchanged. In such an event this could pressure up gold and silver. The upcoming weekly update on jobless claims might also affect the financial markets: if the jobless claims will rise again, this may pull down the USD and consequently gold and silver prices. Finally if the Euro and other related currencies will further rally they could pull up bullion rates.
Here is a reminder of the top events and publications that are scheduled for today and tomorrow (all times GMT):
09:00 – Swiss National Bank Foreign Currency Reserve
09:30 – Great Britain Manufacturing Production
Tentative – French 10 Year Bond Auction
12:00 –Bank of England Rate Decision & Asset Purchase Plan
12:45 – ECB Press Conference and Euro Rate Decision
13:30 – U.S. Jobless Claims Weekly Report
00:50 – Japan Current Account
01:30 – Reserve Bank of Australia – Monetary Policy Statement
Tentative –China’s Trade Balance
05:30 – China’s CPI
13:30 – Canada’s Employment Report
13:30 – Canadian Trade Balance
13:30 –American Trade Balance
Tentative – China New Loans
For further reading:
- Gold and Silver Outlook for February 4-8
- Weekly Outlook Financial Markets for February 4-8
- Gold and Silver Outlook for February
- Gold and Silver Yearly Outlook For 2013