The stock markets sharply fell again yesterday, while gold and silver prices inclined again. Today, many reports will be published including Canadian and American trade balance reports, ECB monthly bulletin and US unemployment claims. Australian unemployment report didn’t show much improvement.
Let’s examine the precious metals market for today, August 11th:
Gold inclined for the third consecutive day, yesterday by 2.37% to new high of $1,784; silver also followed and inclined by 3.81% to $39.33.
During August, gold increased by 9.4%, but silver fell by 1.9%.
The ratio between gold and silver slight fell yesterday after silver bounced back; the ratio reached yesterday Wednesday, August 10th 45.37. During August gold has outperformed silver as the ratio inclined by 11.6%.
S&P500 / Gold & silver– August update
The S&P500 along with other stock indexes fell again sharply yesterday. This reaction dragged along with it all major commodities including gold and silver. The correlation between bullion prices and S&P500 isn’t reliable, but the downward trend of S&P500 is inline with the rise in gold price and to some extent even with the recent rises in silver.
USD/ Gold & silver– August update
The EURO/USD exchange rate continue to zigzag over the concerns in Europe and the expected low rates in the US that push and pull this exchange rate into different directions. Yesterday, the EURO/USD fell by 1.38%; the USD sharply appreciated against other currencies including the Australian dollar and Canadian dollar. This shift might have curbed some of the gains to gold and silver, even though the changes in the USD seem to have less of an effect on the changes in gold and silver during August so far.
Canadian and American trade balance
For the Canadian trade balance regarding May 2011, exports increased by 1.2%, and imports by 1.1%; as a result, the trade deficit narrowed from $857 million in April to $814 million in May; if this trend will continue it may indicate a growth in the Canadian economy.
On the other hand, the American trade balance report for May 2011 showed the goods deficit increased by $6.7 billion compared to April 2011 and reached $64.9 billion; the service surplus rose by only $0.1 billion to $14.7 billion; as a result, the goods and services deficit increased by $6.6 billion to $50.2 billion; if this trend will continue it may indicate a slowdown in the growth of the American economy.
Gold and silver Outlook:
Gold continues to trade up over the high uncertainty in the financial markets that started last week with the low growth rate of US GDP in Q2 2011, the talks over raising the US debt ceiling, followed with the downgrade of US credit rating by S&P over the weekend and finally the recent decision of FOMC to keep interest rates low at least up to mid-2013. These matters pushed many traders towards the bullion market mainly gold as its price rose very sharply during the month so far. 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: Oil Prices – Daily Outlook August 11
Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.