Gold and silver ended the week with gold slightly rising and silver falling; the USD sharply appreciated against the Euro, AUD and CAD, while the US stock markets sharply declined. The concerns over a Greek debt default seem to be one of the prime factors in pulling not only the Euro currency but also commodities down. This week there are many news items that could affect traders including the US PPI, US Federal Budget Balance, and Philly Fed Manufacturing Index. Today, the Australian trade balance report will be published. Let’s examine where the bullion market is headed.
Gold and silver finished the week with mixed trends: Gold price slightly inclined on Friday by 0.11% to $1,859; silver on the other hand declined by 2.13% to $41.62. During September, gold slightly inclined by 1.5% while silver fell by 0.3%.
On Today’s Agenda:
Will there be a Greek default?
One of the main questions that are asked in recent days is whether the Greeks default on their debt. The speculation around this issue continues to run high. There are those who speculate that Germany is already getting ready for a 50pc haircut on Greek debt. In the mean time, these concerns are driving the Euro down along with other currencies and consequently pull gold and silver prices down as well. If the speculations around the threat of a Greek default will continue, it may further affect gold and silver to trade down in the short run, until this issue will be resolved or confirmed.
Australian trade balance report: this report will show the changes in the seasonally adjusted balance of goods and services during July. It could offer some insight to the changes in export of non-monetary gold and suggest the changes in demand for non-monetary gold that could explain the changes in gold
USD / Gold & silver– September update
The Euro/USD continued to free fall and ended the week with a 1.63% decrease; during September the EURO/USD rate fell by 5.0%. The appreciation of USD against the Euro may have curbed the rise in gold on Friday. The USD also sharply appreciated on Friday against other major currencies that are correlated with gold and silver such as AUD and CAD. If this appreciation of the USD will continue, it may further pull down gold and silver.
S&P500 / Gold & silver– September update
The S&P500 fell on the last day of the week by 2.67%. During September, S&P500 lost 5.30% of its value. During September the S&P500 had negative correlations with the daily per cent changes of gold and silver of -0.796 and -0.200, respectively. If the stock market will continue to lose ground, it may further affect gold and silver to trade up.
Gold and silver Outlook:
Gold and silver changed direction several times during September as the falls in the US stock markets and the US Treasury yields may have driven gold and silver up while the appreciation of the USD pulls bullion prices down. If the USD will continue to appreciate against the EURO and CAD it may further affect precious metals to trade down. On the other hand, if the US stock market will trade down, it may curb some of the falls in gold and silver throughout the day. During the rest of September, I still speculate gold and silver will continue to rise at a slow pace.
For further reading:
Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.
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