Gold and silver declined yesterday mainly over the CME margin requirements hike on gold and silver contracts, but currently they already bounce back. The speculation around a bailout plan of the European bailout plan by European policy markets is likely to continue affecting the Forex and commodities markets and the uncertainty. Today, the U.S. consumer confidence report will be published, and the Euro Area monetary development.
Gold and silver declined yesterday: Gold shed on Monday by 2.74% of its value to $1,594; silver fell by 0.42% to $29.98. During September, gold declined by 12.9% and silver fell by 28.2%.
On Today’s Agenda:
Monetary Developments in the Euro Area: This report will show the changes during August in the M3, M1 and private sector loans in the Euro Area. In the previous July report, the M1 fell to 0.9%. The annual growth rate of loans to private sector slipped to 2.4% in July. If this decline will continue in August it could serve as another indicator of a slowdown in economic activity in Europe and may affect ECB’s upcoming interest rate decision (see here the last report);
U.S. Consumer Confidence: in the previous report, the consumer confidence index declined during August compared with July’s index. The current expectations are that this index may continue to drop in the upcoming report;
US Dollar / Gold & Silver– September Update
The EURO/USD rate along with other exchange rates slightly inclined yesterday: the Euro/USD rose by 0.24% to 1.3533; the AUD/USD added 0.55%; the USD/CAD slipped by 0.29%. The recovery of the major currencies against the USD is probably among the forces that curbed the sharp falls in gold and silver in the past couple of days.
S&P500 / Gold– September Update
The S&P500 increased on Monday by 2.33%; during September the S&P500 declined by 4.59%. The negative correlation between the S&P500 and gold (as of September it was -0.308) suggest that yesterday’s decline in gold was partly related to the increase in US stock markets. But if the stock markets will continue to incline during the day, they might also affect gold and curb some of its current rises.
Gold and Silver Outlook:
Gold and silver seem to have ended their correction yesterday with the CME margin hike, and now start the slow recovery of gold and silver in the days to come. The negative US housing report (new home sales) may have helped the recovery of gold and silver. More importantly, the recovery of major commodities including gold, silver and oil today may continue throughout the rest of the week as the speculation around a European bailout program continues to run high.
By the end of September I still speculate that gold and silver will slowly recover from their sharp drops in the past few days, but will finish the month well below their initial price level from the beginning of September.
For further reading:
Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.
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