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Guest Commentary: Gold & Silver Daily Outlook 05.19.2011

Guest Commentary: Gold & Silver Daily Outlook 05.19.2011

2011-05-19 17:41:00
Lior Cohen, Energy Analyst for Trading NRG,

Gold & Silver - Daily Outlook 19 May

Gold and silver bounced back and rose sharply yesterday; they are currently traded with moderate changes. Let's examine the precious metal market and the news related to it for today, May 19th:

Gold and Silver– May

Gold bounced back yesterday and inclined by 1.07% and reached 1,495$.

Silver also inclined and reached on Wednesday 35.10$, a 4.8% incline.

Despite yesterday's rises, during May gold decreased by 3.9%, while silver declined by 27.8%.

The chart below of normalized silver and gold (100= May 2nd) shows the downward trend of both of these metals prices at the beginning of May and during the last week both metals' prices leveled out.

Guest_Commentary_Gold_Silver_Daily_Outlook_05.19.2011_body_Gold_prices_forecast__silver_price_outlook_2011_MAY_19.png, Guest Commentary: Gold & Silver Daily Outlook 05.19.2011

As of Wednesday, May 18th the ratio between gold and silver fell to 42.69. The ratio could be interpreted as one troy ounce (31.1 gram) of gold is worth 42.69 troy ounces of silver.

Guest_Commentary_Gold_Silver_Daily_Outlook_05.19.2011_body_Gold_prices_forecast__silver_price_outlook_ratio_2011_MAY_19.png, Guest Commentary: Gold & Silver Daily Outlook 05.19.2011

Due to the rapid falls in silver prices, mainly at the beginning of May, compared to gold prices, the ratio reached the same level it was back in mid February 2011.

The Yen Connection with Gold and Silver

There was a shift in the yen connection with gold and silver prices in recent months: as seen in the chart below, the linear correlation of the daily percent changes among gold, silver and USD/YEN exchange rate showed strong positive correlations during May.

Guest_Commentary_Gold_Silver_Daily_Outlook_05.19.2011_body_Correlation_Gold__Silver_Prices_and_USD_yen_currency_Dec_2010-_May_2011_may_19.png, Guest Commentary: Gold & Silver Daily Outlook 05.19.2011

As the US dollar depreciated against the Japanese yen during May by 0.6%, gold and silver also declined.

The chart also shows a change in the relationship between USD/YEN and precious metals in recent months; there was a shift from negative correlation during December 2010 to positive correlation during May.

This might suggest of the rising importance of the yen and the Japanese economy in affecting the precious metals prices. As the month will progress it will be interesting to see if this correlation will continue to hold or this finding is just noise.

Japan's GDP declined more then expected Q1 2011

According to Bloomberg, the Yen declined sharply today due to the recent news that the Japanese GDP declined by 3.7% in annual terms at the first quarter of 2011. This figure is higher (in absolute terms) than expected by analysts and economists.


Will there be a Greek Debt restructuring? According to an interview to Bloomberg, European Central Bank Executive Board member Lorenzo Bini Smaghi says that there won't be a restructuring of the Greek debt because this may put Europe in jeopardy. The struggles Greece along with Ireland and Portugal face in paying off their debt to ECB will continue to hang over Europe's stability and affect its uncertainty.

Gold and Silver Outlook:

Gold and silver bounced back yesterday after they had fallen during most of May. There is still high uncertainty in the market in regards to the direction of the major economies direction including Japan, US, Europe and China.

The speculation around the US dollar continues vis-à-vis the future plans of the Fed and the US government high debt of over 14.3 trillion USD – the government debt cap.

Japan's economy continues to rebuild and recover from the damaged it endured from the tsunami attack back in March.

The same goes for the uncertainty around the debt crisis in Europe including in Greece, Ireland and Portugal;

I still speculate that in the short term, silver and gold will remain high and the current uncertainty in the currencies market will reflect in high volatility in these metals' prices but no change in trend.

Here is a reminder of the top events and reports that are planed for today (all times GMT):


13.30 – Department of Labor report - US unemployment claims

15.30 – EIA report about Natural gas storage

Bank of Japan – rate decision and monetary policy statement


13.00 – Canadian Core CPI

For further reading:Gold and silver prices outlook May 2011

By: Lior Cohen, Energy Analyst for Trading NRG

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