Gold & Silver Prices – Daily Outlook August 29

Gold and silver acted very unstable during last week as they sharply fell on Wednesday following the recent CME margin hike on gold trading, but soon after they have rallied. What is next for gold and silver this week? Today, the current president of ECB – Trichet will give a speech; the U.S. pending home sales will be published.

Gold and silver finished the week on a rise: Gold rose on Friday by 1.93% to $1,797; silver also inclined by 0.51% to $41.00. During August, gold increased by 10.2%, and silver by 2.2%. The chart below shows the development of the normalized gold and silver (July 29th 2011=100) during August.

On Today’s Agenda

Trichet speaks: will give a speech regarding the current debt crisis in Europe; perhaps he will hint about his intentions in regards to the ECB interest rates;

US pending Home sales: This news could serve as a good indicator of the progress of the US housing market and the economic development of the US. The recent new home sales report from last week showed a moderate drop in sales during July, so the expectations on this report aren’t that high. Any further news related to a slowdown in the US economy might push more traders towards gold and silver.   

Ben’s speech in Jackson Hole – no QE3 for now

During his speech in Jackson Hole, Bernanke didn’t hint of any stimulus plans in the near future, but also didn’t close the door on it as he said:

 “In addition to refining our forward guidance, the Federal Reserve has a range of tools that could be used to provide additional monetary stimulus.

 If the Fed will eventually choose to use one of its monetary stimulus    tools it may pull gold and silver up in the short run. The problem is that there were many who criticised the Fed’s expanding monetary policy (QE1 and QE2), and its effectiveness.     

 S&P500 / Gold & silver– August update

The S&P500 changed direction and again and finished the week with moderate rises – as it inclined on Friday by 1.51%, and thus completed a rise of 4.71% during last week, but during August, S&P500 fell by 8.94%. During August, the S&P500 had a negative correlation with the daily per cent changes of gold and silver prices; so that if the S&P500 index will incline today, it may curb some of the gains in gold and silver.

 US Treasuries / Gold & silver– August update

The US 10-year Treasury yields slipped again the past couple of business days to 2.19%, but gained back nearly 0.09 per cent points during last week. During August they have fell by 0.63 per cent points. If the growth in demand for U.S. Treasury bills will continue and the yields will further fall, it may further indicate that traders are leasing towards safe heavens including gold and silver.

 Gold and silver Outlook:

Gold and silver bounced back from their falls in the past couple of business days. The effect of the CME margin hike on gold trading seems to have subsided for now as gold and silver are resuming their rally.  The uncertainly in the financial markets is still high so that it’s likely to contribute the stability of gold and silver prices. Despite Bernanke’s speech, in which he didn’t commit to another stimulus plan,  I still speculate that gold and silver will continue to rally at a slower pace than during the second week of August.

For further reading:

 The fall and rise of gold & silver | weekly recap 22-26 August

Gold and silver prices outlook for August 2011

Weekly Outlook for August 29- 2 September


Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.