Gold and silver sharply fell yesterday; from the end of last week, they have completed 4.2% and 5.1% deceases, respectively. The recent announcement of ECB along with the Fed to issue US dollar based loans to European Banks may have helped restore some confidence in the European market and consequently rallied up the Euro against the US dollar. This news also eclipsed the negative results of the Philly Fed Manufacturing Index. The declines in precious metals prices coincided with the recent rally of US stock markets and the rise in US Treasury bills yields. Today, US TIC long term purchases will also be published.
Gold and silver sharply declined yesterday: Gold price fell on Thursday by 2.47% to $1,781; silver also declined by 2.55% to $39.50. During September, gold declined by 2.7% while silver fell by 5.4%.
On Today’s Agenda:
US TIC long term purchases: This upcoming report of the main changes in the purchases and sales of US long term treasuries in July, will provide some insight into the change in US Treasuries longer-term notes – a market that is highly correlated with the changes in the bullion market (see here my last review of June 2011).
USD/ Gold & silver
The Euro/USD continued its recovery as it slightly inclined yesterday by 0.89% to 1.3877; during September the EURO/USD rate fell by 3.4%.
S&P500 / Gold & silver
The S&P500 continue to rise as it inclined yesterday by 1.72% – during the week it has completed a 4.75% rally, but during September the S&P500 fell by 0.80%. The negative correlation between the S&P500 and gold and silver suggest that the ongoing drop of precious metals’ prices coincides with the rally in the US stock markets.
US Treasuries / Gold & silver
The US 10-year Treasury yields continue to rise; yesterday they have gained 0.06 per cent points to 2.09% – the highest rate since the beginning of the month; during September they have fallen by 0.14 per cent points. US 10-year Treasury yield has a strong negative correlation with gold daily per cent changes (see chart below); thus the recent rise in yields reflects the slowdown in the recent purchase spree by traders of safe heave securities.
Gold and silver Outlook:
Gold and silver sharply fell during the week (so far) and may continue to do so as the confidence in the financial markets are regained; this change is reflected not only in the bullion market, but also in the American and European stock markets and the long term US Treasury bill market. This trend may continue today, but eventually the problems the US and Europe are facing may rekindle the surge of gold and silver.
Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.
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