Gold and silver finished yesterday with sharp rises, but will this trend continue throughout the day? Gold and silver are currently traded with mixed trends. Today, the Bank of Japan announced it will keep rate unchanged but expanded its monetary easing plan (USD/JPY reacted and hiked up); ECB will announce its rate decision and US department labour will publish its US unemployment claims for last week.
Let’s examine the precious metals market for today, August 4th:
Gold inclined again yesterday by 1.33% and reached $1,666. Silver also inclined by 4.16% to $41.76.
During August, gold increased by 2.2% and silver rose by 4.1%.
BOJ expanded monetary policy
The Bank of Japan announced it will keep the overnight rate at 1 to 0.1 per cent; it also announced to enhance the monetary easing plan, i.e. increasing the total asset purchasing program, by adding an additional 10 trillion yen (roughly $126 billion) to the plan from 40 trillion yen to 50 trillion yen. This means that the BOJ will further “print Yen” which will reduce its value compared to other major currencies including USD. This news had an immediate reaction in the Forex market as the USD/Yen rose very sharply; it’s currently traded at 79.7838 as of 10:21 (GMT) which is an increase of 3.5342%. This shift is likely to further strengthen the US dollar against other currencies and might also have a negative effect on gold and silver, as it might curb their recent rally.
ECB rate decision
Today, the European Central Bank President, Jean Claude Trichet, will announce the rate decision for the month of August. The rate is currently at 1.5% after the ECB raised the rate last month by 0.25%; currently the Euros/USD is traded down, partly due to announced of BOJ to expand its asset purchasing plan; since the Euro Area inflation reached in July 2.5% which is a decrease from 2.7% during June; its likely that Trichet will keep the rate unchanged.
Gold and silver Outlook:
Gold and silver rose very sharply in the past couple of days but they are currently traded down, due, in part to the recent news from Japan of expanding quantitative easing plan; even if the ECB rate will remain unchanged, it seems that the recent news from Japan will continue to curb the rally of gold and silver during the day; this effect, however is likely to dissipate very soon and afterwards the rally of gold and silver are likely to resume..
For further reading: Gold finished on top | silver at bottom – weekly recap 25-29 July
Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.