Gold and silver kept on rising but at a much slower pace than at the beginning of the month. Silver changed from red to green in August as it slowly climbed back up from the sharp falls it reordered earlier this month. Today, the U.S. cpi will be published; The US unemployment claims and US existing home sales.
Gold inclined on Wednesday by 0.49% to $1,793; silver also followed and inclined by 1.33% to $40.38.
During August, gold increased by 10%, and silver slightly inclined by 0.7%.
The chart below shows the normalized gold and silver (July 29th 2011=100). Gold and silver are currently on an upward trend with a much gradual slope than in the beginning of the month.
U.S. unemployment claims
The weekly update on unemployment claims will be publish and serves as a good indicator of the weekly changes in the people outside the U.S. labour market. For the week ending on August 6th, initial claims decreased by 3,250 to 405,000 claims (4-week moving average), and the number of insured unemployment fell by 15,000 to 3.718 million (4-week moving average). If this decrease will continue it may indicate more people found jobs or gave up looking, but in any case will decrease the rate of unemployment (see here my recent review on the US labour market).
U.S. existing home sales
Following the decline in US housing starts and building permits as states in the recent U.S. Census Bureau report for July 2011, the report on the U.S. existing home sales might also show a slow down in July. In the June report, the seasonally adjusted annual rate reached 4.77 million home sales compared with an annual rate of 4.81 million home sales in May 2011, a 0.8% drop. This might be another indicator of the economic slowdown in the US.
USD / Gold & silver– August update
The Euro/USD slightly inclined yesterday by 0.12%, despite the disagreement in the recent German-French summit over the debit crisis in Europe; the USD slightly depreciated against other currencies including the AUD and CAD. The high volatility in the forex market that was mainly in the beginning of the month has slightly subsided, but could erupt again very promptly; if the forex markets will resume its high volatility, it could affect gold and silver to increase. The Euro/USD was highly correlated (positive correlation) with gold and silver (daily per cent changes); this means, during August as the Euro appreciates against the USD, gold and silver are traded up.
US PPI – rose by 0.2% in July 2011
The producer price index for finished goods inclined by 0.2%, after the PPI fell by 0.4% in June; this index is estimated to have a lagged negative linear correlation with gold; i.e. as the PPI rises, gold falls the following day. Since gold price is experiencing an upward trend, this news is less likely to shift the direction of gold, but it might curb its increase.
Gold and silver Outlook:
Gold and silver continue their upward trend but with a gradual slope. The US existing home sales might continue to show a slowdown in the US housing market. This might push up gold and silver. On the other hand, the PPI report might curb the rises in gold and silver, and perhaps even cause them to fall today. Finally, the disappointing Euro Summit didn’t seem to affect many traders as the Euro didn’t depreciate yesterday.
I still think that gold and silver will continue their rally, but with much less volatility than in the beginning of August.
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Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.