Gold and silver bounced back on Friday from the sharp falls they have had a day earlier. During September both metals didn’t do much despite their high volatility. The rising concerns over Greece defaulting on its debt might be among the contributing factors for recent decline in the Euro/USD and resulting in pressuring gold to start the week on a positive note. What is next for gold and silver? Today, the minutes of the last Monetary Policy meeting of Australia’s Central bank will be published.
Gold and silver sharply inclined on Friday: Gold rose on Friday by 1.87% to $1,814; silver also bounced back and inclined by 3.37% to $40.83. During September, gold declined by 0.9% while silver fell by 2.2%.
The two precious metals still have a strong, positive and consistent correlation during September as they did in previous months.
On Today’s Agenda:
Reserve Bank of Australia Monetary Policy meeting: The minutes of the monetary policy meeting of the reserve bank of Australia will be published, regarding the recent decision of the Bank’s basic interest rate; this decision might also affect the AUD/USD exchange rate and consequently gold and silver.
S&P500 / Gold & silver– September update
The S&P500 continue to rise as it inclined on Friday by 0.57%; during the week it has completed a 5.35% rally, but during September the S&P500 decreased by 0.24%. The negative correlation between the S&P500 index and gold and silver (as of September it was -0.639 and -0.207, respectively) suggest that the changes in precious metals’ prices coincides to a certain extent with the rally in the US stock markets. If the stock markets will continue to rise, it may dampen the rally of gold and silver as alternative investment to the stock market.
USD/ Gold & silver– September
The EURO/USD changed direction on Friday and slightly declined by 0.58% to 1.3796, after it inclined by 0.9% during last week; during September the EURO/USD rate fell by 4.0%. If the USD will continue to depreciate against major currencies including Euro, AUD and CAD as it did last week; it may also affect gold and silver to trade up.
US Treasuries / Gold– September update
The US 10-year Treasury yields shifted direction on Friday and slightly fell 0.01 per cent points to 2.08%; during September they have fallen by 0.15 per cent points. US long term Treasury yields have strong negative correlations with gold daily per cent changes, e.g. the linear correlation between 7 yr Treasury yield and gold during September (up to date) was 0.668; thus if the yields will continue to drop, it may reflect a renewed purchase spree by traders of safe heave securities and may coincide with a rise in gold.
U.S. Treasuries Securities rose again in July
According to the recent report regarding July of the U.S. Department of the Treasury, regarding the changes in domestic and foreigners’ holdings of U.S. Treasuries, the net foreign purchases of longer-term U.S. securities grew by $9.5 billion during August; on the other hand, the holdings of longer-term U.S. securities by countries slightly slipped by $17.9 billion during July compared with June’s figures. This finding suggest that there is still a growing demand for US Treasuries by foreigners that might also reflect a growing demand for safe heaven investments such as gold and silver.
Gold and silver prices Outlook:
Gold and silver didn’t do much in the first couple of weeks of September, despite their sharp shifts and high volatility. The financial markets are still stirring over the stability of Europe and the progress of US’s economy. Many still bet on commodities to keep rising in the near future. The direction of the stock markets and the L-T US securities yields may provide an indictor to the direction of bullion prices. I still speculate that in the near future gold and silver will continue their slow upward trend, even if they may continue seeking direction throughout the week.
For further reading:
Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.
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