Gold resumed its upward trend but at a much slower pace than at the beginning of the month. Silver almost erased all the falls it had at the first few days of August. Today, the U.S. producer pride index will be published; The Euro AREA CPI and Japanese trade balance.
Let’s examine the precious metals market for today, August 17th:
Gold inclined on Tuesday by 1.54% to $1,785; silver also inclined by 1.3% to $39.34. During August, gold increased by 9.4%, but silver fell by 0.6%.
The ratio between gold and silver continues to remain around the 44-45 mark; on Tuesday, August 16th it reached 44.80. During August gold has outperformed silver as the ratio inclined by 10.1%.
US PPI – July 2011
This report will present the inflation rate from producers stand point. In the previous report regarding June, this index for finished goods declined by 0.4%, after a rise of 0.2% in May; in the last month, the index declined mainly due to the drop in energy prices by 2.8%; this index is estimated to have a lagged negative linear correlation with gold; i.e. as the PPI falls, gold rises the following day.
Euro Area CPI – July 2011
In June 2011, the annual inflation rate was 2.7%, unchanged compared with May’s for Euro Area; the inflation rate is still above the target inflation of ECB. The expectations in the upcoming CPI report for July 2011 are a slight decline. This news might affect the Euro currency, ECB’s rate decision and consequentially a small effect on major commodities prices including gold and silver.
Gold and silver Outlook:
Gold and silver continue with their rally but at a slightly slower pace than in the beginning of the month. The US housing market didn’t provide good news and might provide some additional fuel to the rally of gold and silver. The disappointing Euro Area GDP growth rate is also likely to contribute to their rally. The major stock markets fell yesterday, but its not clear their direction due to the high volatility in the markets; if stock markets indexes will resume their descent, it might also help gold and silver to rise. Therefore, I still think that gold and silver will continue their rally, but with much less volatility than in the beginning of August.
For further reading: Gold and silver prices outlook for August 2011
Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.