Gold & Silver Outlook 05.10.2012

Gold and silver prices continued their descent during yesterday. As a result of yesterday’s fall gold price reached its lowest level since December 2011l. The price of silver is the lowest since January 9th 2012. There still growing concerns that the recent results in the French and Greek elections will adversely affect the austerity plans that were agreed upon in the past to pull out the EU from its debt crisis. The Euro declined in the past eight consecutive days and dragged along with it other exchange rates. There are many events and reports on today’s agenda including: Bernanke’s speech, U.S jobless claims (update: jobless claims at 367k), Great Britain Bank Rate & Asset Purchase Plan and the trade balance reports of China, U.S and Canada.  Currently gold and silver prices are slightly rising.        

Here is a short analysis for gold and silver prices for Thursday, May 10th:

Gold and Silver– May Update

Gold price declined again on Wednesday by 0.64% to $1,594.2; silver also decreased by 0.74% to $29.24. During the month gold decreased by 4.21% and silver by 5.72%.

In the chart below are the normalized prices of bullion during the past few weeks (gold and silver are normalized to 100 as of April 30^th).

The ratio between gold and silver edged up again to 54.52. During the month the ratio increased by 1.61% as gold has moderately outperformed silver during May. In the chart below are the changes of this ratio during May.

On Today’s Agenda

Great Britain Bank Rate: Bank of England will decide on its basic rate for May 2012 and the progress of its asset purchase plan; as of April the BOE’s rate was still flat at 0.5% and the asset purchase plan of £325 billion continues;

U.S. Jobless Claims Weekly Report:  in the previous report the jobless claims sharply declined to 365,000; this upcoming weekly report may affect the path of the U.S dollar and consequently precious metals prices;

Bernanke Speech: following the FOMC meeting of April the Chairman of the Federal Reserve will give a speech regarding the US banking that may affect the direction of forex and commodities markets. The title of the speech is ” Banks and Bank Lending: The State of Play “;

American Trade Balance: The American trade balance report for February 2012 the goods and services deficit decreased during the month to $46 billion.

Canadian Trade Balance: In the previous report for February, exports fell by 3.9%, and imports edged up by 0.2%; as a result, the trade balance shrunk to a surplus of $292 million; this report may affect the trading of the Canadian dollar which is strongly correlated with price of gold and silver;

China’s Trade Balance: according to the previous report, China’s trade balance changed direction from a $31.5  billion deficit to a $5.4 billion surplus; if the exports will rise it may indicate that China’s economic growth is rising and thus may positively affect prices of bullion;

Foreign Exchange / Gold & Silver Market – May Update

The Euro/U.S Dollar decreased again on Wednesday by 0.58% to 1.293. During the month so far the Euro/U.S Dollar decreased by 2.33%; furthermore, the Canadian dollar and Aussie dollar also depreciated on Wednesday vs the U.S. dollar by 0.39% and 0.70%, respectively. Since the Euro, Aussie dollar and Canadian dollar are strongly and positively correlated with gold and silver prices(see the chart below for the linear correlations among these currencies with bullion prices), if the U.S dollar will continue to trade up; this may keep the downward trend of gold and silver prices. Currently the Euro is rising against the USD.

Current Gold and Silver Prices as of May 10th

Gold (June 2012 delivery) is traded at $1,598 per t oz. a $3.8 or 0.24% increase as of 14:28*.

Silver (June 2012 delivery) is at $29.28 per t oz – a $0.039 or 0.13% increase as of 14:26*.

Gold and silver prices continued their downward trend during yesterday’s trading and thus declined in the past three consecutive days. Will this fall continue? Usually after several days of falling a correction tends to occur; this correction might take place eventually today if there will be negative results in the upcoming U.S reports including the trade balance and jobless claims. Furthermore, Bernanke’s speech might also rally the markets especially if he will hint of the Fed’s intent to get involved in the markets again. But keep in mind that the recent developments in Europe are likely to keep the Euro weak and the dollar strong, which in turn is likely to keep gold and silver prices’downward trend.