Gold and silver slowed down their rally as gold rose by only 0.18% during this week and silver price by only 0.51. The U.S. debt ceiling continues to occupy the financial news – today a bill proposed by Boehner to cut US deficit will be voted in the House; the forex and commodities markets already seem to have incorporated the uncertainty from US debt news as they didn’t change much in recent days. Today, the U.S. unemployment claims report will be published and the US pending home sales.
Let’s examine the precious metals market for today, July 28th:
Gold price moderately declined yesterday, July 27th by 0.12% to $1,617. Gold slowed down in recent days and following Monday’s increase, gold didn’t change much afterwards.
Silver also declined by 0.32% to $40.57. Silver price only inclined by 0.51% during the past three days.
USD/ Gold & silver– July update
The Euro/USD exchange rate continues to zigzag and yesterday it fell by 0.99%; during July this exchange rate fell by 0.9%.
The talks in the Washington over the US debt ceiling might continue to affect the USD, even though there is no clear trend in recent days for the USD.
Furthermore, as seen in the chart below, of the linear correlations of the daily per cent changes between precious metals and EURO/USD exchange rate. During June the correlations were positive and strong, but in the July (UTD) the correlation of gold and EURO/USD shifted direction and was negative for the first time in 2011. This shows that the relation between EURO/USD and precious metals isn’t the same it was in previous months; furthermore, the high increase in gold and silver doesn’t seem related to the changes in the EURO/USD.
US debt ceiling – voting to cut deficit
The current update is that later today there will be a vote in the House of Representatives on a bill to cut the budget deficit; the bill was proposed by Speaker of the house Boehner. If this bill will pass, it might move the current stalemate in Washington between Republicans and Democrats over raising the debt ceiling. On the other hand, President Obama said if the bill will pass he will veto it. The deadline before the US is expected to default on its debt is August 2nd.
Gold and silver Outlook:
Gold and silver started to slow down and during the past three days didn’t change much, probably because the market is waiting for the conclusion of the US debt ceiling talks. It could also mean that the market has already priced in the uncertainty vis-à-vis the US debt into the gold and silver prices. Unless there will be any breaking news today, gold and silver are likely to moderately change throughout the day and continue its upward trend.
Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.