The stock markets bounced back from the sharp falls they had recorded on Monday; this shift didn’t stop from gold price to continue its rally and break new highs. Silver changed direction and sharply fell. The FOMC kept the US basic interest rate unchanged. Today, the Australian unemployment report will be published.
Let’s examine the precious metals market for today, August 10th:
Gold increased again yesterday by 1.74% to new high of $1,743; silver on the other hand, declined by 3.80% to $37.88. During August, gold increased by 6.9%, but silver fell by 5.5%.
Federal Reserve kept rate unchanged
Yesterday the Federal Reserve decided to keep the basic interest rate unchanged. The FOMC expects the US economy to experience a slow paced recovery, the unemployment rate will decline only gradually, but at least the US inflation rate is expected to settle as energy commodities prices have came down. The FOMC didn’t elaborate or hinted of any QE3 in the near future. This news might have stabilised the financial markets, but it didn’t reassure the bullion traders as gold continue to trade up.
USD/ Gold & silver– August update
The Euro/USD exchange rate sharply inclined on Tuesday by 1.4%; the USD sharply depreciated against other currencies including the Australian dollar and Canadian dollar. This backwind also probably helped gold prices to trade up. If the USD will continue to depreciate during the day, this might continue to push gold and silver to trade up.
Gold and silver Outlook:
Gold continues to trade up in August mainly due to the high uncertainty in the financial markets stem from the downgrade of US credit rating by S&P over the weekend. The Federal Reserve decisions to keep rates low all through mid 2013 along with its economic outlook of US’s slow recovery are likely to push gold price further up. On the other hand, silver isn’t rising as gold is, but this trend is likely to change and silver will eventually catch up with gold price’s rally. There are many speculations behind this turn of events about silver’s fall, but none of them seem to provide a good enough explanation. In any case, the sharp changes in gold and silver are likely to dissipate in the next few days and then gold and silver will stabilise and resume their slow upward trend.
For further reading: Gold and silver prices outlook for August 2011
Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.