Guest Commentary: Gold & Silver Daily Outlook 05.17.2011
Gold and silver started off the week with falls, and continue this path as they are currently traded down, because of the uncertainty in the financial markets. Let's examine the precious metal market for May 17th:
Gold and Silver– May
Gold price started off the week with a very moderate decline of 0.20% and reached 1,490$.
Silver also declined and reached on Monday 34.13$, a 2.52% decline.
The chart below of normalized silver and gold prices (100= May 2nd) shows the downward trend of both of these metals prices during May.
As of Monday, May 16th the ratio between gold and silver fell to 43.67. The ratio could be interpreted as one troy ounce (31.1 gram) of gold is worth 43.67 troy ounces of silver.
During May, the changes in gold and silver were probably stimulated, in part, by the changes in the US dollar compared to major currencies.
The chart below shows the strong correlation of gold and silver (daily percent changes) with AUD/USD.
During May, so far, the high linear correlation between AUD/USD and gold reached 90% correlation. This is the highest correlation that recorded in 2011 between AUD/USD and gold prices.
Australia is among the leading countries in producing gold, and during the last quarter of 2010, Australia was the leading country in gold production growth. This growth was due to rising production of Newmont Asia Pacific.
The recent decline gold prices, probably affected the AUD/USD as it fell by 3.8% during May (UTD).
Ben's speech –yesterday, the chairman of Federal Reserve gave a speech about the labor market and economic growth. He referred to the importance of reach and development in the US economy; the R&D was usually stable around the 2-2.5% of GDP (private and public). In order to stimulate the economy the government should support R&D. By doing so, it could lead to an economic growth. Bernanke didn't directly refer to the upcoming ending of the stimulus plan of the Federal Reserve at the end of June.
Since the inflation rate reached the expectations, the EURO/USD didn't change much yesterday and the major commodities were affected from the news.
The concerns around the stability in the Middle East aren't just because many of OPEC members are located there, but also because of its pivotal location for transport. See here for the recent news from the Middle East.
Gold and Silver Outlook and Analysis:
Gold and silver continue to demonstrate no clear direction in recent days following the first week of May in which they have tumbled down (especially silver).
The speculation around the US dollar over the future plans of the Fed once the quantitative easing plan will end in June;
The economic recovery of Europe, and its debit crisis including in Greece, Ireland and Portugal;
These factors, among others, will continue to affect the high volatility we currently experience in the financial markets and the precious metals markets.
I still speculate that in the short term, silver and gold prices will remain high and the current uncertainty in the currencies market will reflect in high volatility in the commodities markets.
Here is a reminder of the top events and reports that are planed for today (all times GMT):
2.30 – Monetary Policy meeting Australia's Bank
15.30 – EIA report about Crude oil inventories
19.00 – FOMC meeting minutes regarding rate decision
By: Lior Cohen, Energy Analyst for Trading NRG
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