Gold and silver tumbled down yesterday along with many other commodities rates and U.S stock markets. This negative sentiment is likely to shift as the EU Summit concluded yesterday with a decision to establish a united supervisory mechanism for EU banking system. It was also decided that struggling EU banks (including Spanish banks) will be bailed out by the EU rescue fund. The EU leaders also agreed to relinquish the condition that emergency loans to Spanish banks provide their governments preferred creditor status. This news is likely to pull back up not only the Euro but also bullion. Yesterday U.S jobless claims nearly didn’t change; U.S GDP also remained unchanged for Q1 2012.
On today’s agenda: Euro Area Monetary Development, German Retail Sales, Italian 10 Year Bond Auction, Euro Area Flash Estimate of Annual Inflation and Canada’s GDP by Industry.
Gold fell on Thursday by 1.77% to $1,550.4 – the lowest price level this month so far; silver also tumbled down by 2.63% to $26.29. During the month gold decreased by 0.88% and silver by 5.28%. Furthermore, yesterday the SPDR Gold Shares (GLD) also tumbled down by 1.16% and reached by June 28th 151.05.
On Today’s Agenda
Euro Area Monetary Development: In the previous April report, the annual growth rate for M3 sharply fell to 2.5%. The M1 also decreased to 1.8%. Finally, the annual growth rate of loans to private sector decreased to 0.6%. If the M1 and M3 will continue to contract this could serve as another indicator for the declining inflation pressures in the Euro Area, and it may affect the future ECB interest rate decision;
Canada’s GDP by Industry: the report will present the changes in major industrial sectors for April 2012. In the previous report regarding March 2012, the real gross domestic product edged up by 0.1%. This report may affect the strength of the Canadian dollar exchange rate which is strongly linked with commodities;
Bullion tumbled down yesterday but today I speculate they are likely to bounce back; this comes after the EU Summit decided to tighten the supervision on the EU banks and in the same time bailout the banks with the rescue fund so a sovereign nation won’t have to raise funds to bailout its banking system (Spain).This might stabilize the EU and especially lower the risk on several countries that were faced with a collapsing banking system. This decision also means the EU leaders found a way to help countries such as Spain while circumventing the process of issuing EU bonds. This news is likely to dominate the news cycle and pull up not only the Euro but also precious metals.
For further reading: Gold & Silver | Weekly Outlook June 25-29