Gold continued its decline and finished yesterday in the red while silver remained virtually unchanged. Today, U.S. Consumer Price Index will be published; the U.S. building permits and housing starts report as well.
Gold sharply declined on Tuesday by 1.42% to $1,652.8; silver on the other slightly inclined by 0.03% to $31.83. During October, gold inclined by 1.9%, and silver by 5.8%.
Despite the change in direction in which gold and silver priced moved in different direction their relation is still robust with a strong and positive correlation as indicated below.
On Today’s Agenda:
U.S CPI: This monthly report will show the main changes in the consumer price index during September. According to the US Bureau of labour statistics for August 2011, the CPI inclined by 0.4% and over the last 12 months by 3.8%. The core CPI inclined in August by 0.2%;
U.S. Building Permits & Housing Starts Report: The recent report showed an improvement in the building permits during August 2011, while the adjusted annual rate for housing starts fell during the month; the last parameter was historically correlated with gold– as housing starts declined, gold tend to rise the following day (see here the recent review);
Update on European Debt Crisis – Spain’s Rating Cut
The recent news from Europe is that Moody’s, on the leading rating agencies, announced yesterday it will cut Spain’s rating by two levels from Aa2 to A1. This is the third time in two years that Moody’s reduced Spain’s credit rating. This news didn’t come much as a surprise to the markets as the European and American stock markets continued to rise yesterday (see below).
All eyes are still towards next week’s Euro summit about the European debt crisis and augmenting the EFSF fund to €2 trillion.
USD / Gold & Silver– October
The AUD/USD sharply inclined on Tuesday by 1.03% to reach 1.0141; other currencies also rose against the USD including the CAD and Euro. If the “risk currencies” (AUD and CAD) will keep on rising today, they could also assist the progress of gold and silver during the day.
Gold and Silver Outlook:
Gold and silver broke out of formation as silver price slightly inclined while gold price sharply fell. The U.S. PPI report may have affect gold and silver yesterday; today the upcoming housing report and U.S. CPI may also influence precious metals traders as indicated above. Furthermore, the speculation over the next steps of Euro leaders will continue to stir up the markets and may push gold and silver throughout the week.
For further reading:
Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.