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Gold & Silver - Daily Outlook 10 June

Gold and silver bounced back yesterday, but they still seek a direction as they are currently traded down. Let's review the precious metals market for today, June 10th:

Gold and Silver– June

Gold price ended June 9th with a 0.26% rise as it reached $1,542.

Silver also inclined yesterday by 2.2% to $37.42.

During June, gold increased by 0.4%, while silver declined by 2.3%.

In the chart below are the normalized silver and gold (May 31st 2011=100) and their changes during June.

Guest_Commentary_Gold_Silver_Daily_Outlook_06.10.2011_body_Gold_prices_forecast__silver_price_outlook_2011_JUNE_10.png, Guest Commentary: Gold & Silver - Daily Outlook 06.10.2011

US Dollar and Gold and Silver Prices – June Update

On Thursday June 9th, the US dollar continued its recent rally and appreciated by 0.5% against Euro, but lost some of its value against CAD and AUD by 0.64% and 0.04%, respectively.

The decline of US dollar compared with AUD and CAD – two currencies that are strongly associated with major commodities including gold and silver – might have been among the factors to assist with the recent moderate rises in gold and silver yesterday.

But since these changes are very moderate in the forex and commodities markets, it's hard to correlate these prices fluctuations with each other. Once there will be a sharp direction shift in forex markets and commodities markets or both, it will be easier to link a cause and affect relationships.

Gold & Silver and S&P500- June

During May there was a strong positive linear correlation between precious metals daily percent change and S&P500 index. This correlation, however doesn't seem to hold up during June as the S&P500 index fell during most of June, while gold prices remained flat.

Yesterday, the S&P500 index inclined by 0.74% compared with the previous day. This change coincides with the incline of gold and silver.

Guest_Commentary_Gold_Silver_Daily_Outlook_06.10.2011_body_Chart_Gold_Prices_and_SNP500_June__2011_10_June.png, Guest Commentary: Gold & Silver - Daily Outlook 06.10.2011

That being said, these abovementioned correlations and relations might also be just noise, especially since these daily percent changes are very moderate. It's easier to see a link when these indexes fluctuate by a high rate.

ECB Rate Decision

As expected, the European Central Bank left the rate at its current level of 1.25%, but the ECB might consider changing it in the next rate decision next month (for more on the rate decision see here).

This decision might have been among the news items that influenced traders to trade down the EURO. As a result this might further strengthen the US dollar and if so, this could weaken major commodities including gold and silver.

Gold and Silver Outlook:

The recent rise in gold and silver don’t seem to reflect a new trend or a change in direction, just a fluctuation that reflect the no clear direction gold and silver have experienced in recent weeks. In the mid term I think that gold and silver will start to pick up again, but this won't happen over night and in the meantime I still speculate that gold and silver will maintain their current price level until a new development will occur to stir up the financial markets.

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

Today

Chinese Trade Balance report

12:00 – Canada unemployment rate and employment report

For further reading:Gold and silver prices outlook for June 2011

By: Lior Cohen, Energy Analyst for Trading NRG