Gold & Silver - Daily Outlook July 8

Gold and silver continued their rally for the third straight day and they currently traded up; this rise is despite the recent news of ECB’s rate decision from yesterday to raise its interest rate to 1.5%.. Today, the U.S. labour report was published and showed very little improvement, how, if any, will it affect the bullion metals market?

Let’s examine the news of the day related to the precious metals market for today July 8th:

Gold and silver–July

Gold price inclined on Thursday, July 7th by 0.09% to $1,530 – its highest price level since June 22nd.

Silver price also inclined yesterday by 1.51% to $36.46 – the highest price also since June 22nd.

During July, gold price increased by 1.8%, and silver price inclined by 3.1%.

The chart below shows the normalized gold and silver (May 31st 2011=100). It shows that gold is very close to its price level back in the end of May; silver is climbing very sharply in recent days, but is still well below its price level back in May 31st.


US labour report

The US labour report didn’t show much improvement and the number of non-farm employees increased during June by only 18,000. The rate of unemployment remained nearly unchanged at 9.2%. 

 Historically, this news had a negative effect on gold and silver (as the employment inclined, gold and silver fell), but this was mostly due to a currency effect (US dollar).

 ECB rate decision

 Following yesterday’s decision of the ECB to raise the rate by 0.25 per cent points to 1.5%, the market didn’t react much to the news as the EURO/USD only moderately inclined (see here for more on the ECB rate decision analysis).  Historically, this decision had a moderate lagged negative effect on gold price even when controlling for the effect this news had on US dollar; i.e. as the ECB rate rises, gold falls the following day; in the previous rate raise back in April 13th, gold declined.

 Gold and silver Outlook:

Gold and silver are likely to continue their moderate rises today, despite the ECB rate decision which should curb their rally; they are likely to moderately rise due to today’s disappointing US labour report.

 For further reading:

Gold and silver prices outlook for July 2011


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