Gold and Silver Outlook for October 16
Submitted by Trading NRG as part of our contributors program.
The prices of gold and silver continued their downward trend direction and following yesterday’s tumble they have both returned to their pre-FOMC QE3 decision prices. The recent U.S retail sales report was better than many had anticipated as the retails sales rose by 1.1% during September. This news may have lowered the expectations of many bullion traders for another FOMC monetary stimulus that could lower the value of the USD and thus pull up the prices of gold and silver. There are still speculations around the growth ofChina’s economy. Tomorrow’s GDP report for Q3 may shed some light on this issue. On today’s agenda: Great Britain CPI, German ZEW economic sentiment, BOE Inflation Estimate, U.S Core Consumer Price Index and U.S. TIC Long Term Purchases.
On Monday, Gold declined again by 1.26% to $1,737.6 – the lowest level sine September 12th. This means, the recent tumble in the price of gold nullified the positive effect the FOMC decision to launch QE3, which was announced on September 13th, on precious metals prices; Silver also fell by 2.75% to $32.74. During the month, gold declined by 2.05%; silver, by 5.3%.
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On Today’s Agenda
U.S Core CPI: During August, the CPI rose by 0.6%(M-o-M); the core CPI rose by 0.10%; the core index rose over the last 12 months by 1.9%;
Great Britain CPI: this report will refer to the yearly rate of GB’s CPI as of September; some expect the August inflation will further decline; in the recent report regarding August the annual CPI decreased from 2.6% to 2.5%; this news may affect the British pound;
German ZEW economic sentiment: The upcoming publication will refer to the ZEW indicator of economic sentiment for Germany for October. For September the ZEW indicator for Germany rose by 7.3 points to -18.2 points; if Germany’s economic sentiment won’t show signs of improvement, the Euro will plausibly remain weak against other currencies;
U.S. TIC Long Term Purchases:The Treasury International Capital report will show the shifts in the purchases and sales of US long term treasuries in August 2012. In the previous report regarding July 2012, the net foreign sales of U.S Treasuries longer-term notes reached $67 billion;
Currencies / Bullion Market – October Update
The Euro/ USD edged down on Monday by 0.02% to 1.2949. On the other hand, several currencies including AUD slightly appreciated yesterday against the USD. The correlation between gold and Euro remains mid-strong and positive: during October, the linear correlation between the gold and EURO/USD was 0.49 (daily percent changes); the linear correlation between the gold and USD/CAD was -0.46 (daily percent changes). The chart below shows the linear correlations among leading currencies pairs and the prices of precious metals. The moderate movement in forex markets in which the Euro depreciated while the AUD appreciated didn’t seem to affect bullion prices yesterday. Nonetheless, if the Euro and other risk currencies will bounce back, they are likely to pull up gold and silver.
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