Guest Commentary: Gold & Silver Daily Outlook 08.05.2011
Major stock markets around the world including S&P500, NASDAQ and Hang Seng recorded sharp falls in their indexes, while the US dollar appreciated very sharply against major currencies, along with gold and silver. What is next for gold and silver? Today, the US labor report will be published, the Canadian employment report and Canadian building permits.
Gold and Silver–August
Gold price changed direction again and fell yesterday by 0.44% and reached $1,659. Silver sharply declined by 5.57% to $39.43.
During August, gold increased by 1.7% and silver fell by 1.7%.
The chart below shows the normalized gold and silver (July 12th 2011=100). As seen below, gold and silver rose very sharply during the first few days of August up to yesterday.
BOJ Expanded Monetary Policy
The Bank of Japan announced yesterday to increase its total asset purchasing program, by adding 10 trillion yen (roughly $126 billion) 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 yesterday by 2.37% and reached 78.886. This shift also affected the position of US dollar against other major currencies as it appreciated against the Euro and Australian dollar. This reaction had a negative effect on gold and silver prices, and curbed the rally of gold and silver prices.
S&P500 / Gold & Silver– August Update
The S&P500 along with other stock indexes from around the world fell very sharply yesterday over the concerns of US falling into a double dip recession. This reaction dragged along with it all major commodities including gold and silver. The correlation between bullion prices and S&P500 isn't reliable, but yesterday the falls in the stock markets may have also dragged along major commodities. The chart below shows the changes in S&P500, gold and silver during August (normalized to July 29th=100).
USD/ Gold & Silver– August Update
The Euro/USD exchange rate sharply declined yesterday by 1.61%; the USD also appreciated against other currencies including the AUD and YEN. The drop in the Yen is probably one of the reasons for the appreciation of US dollar against other currencies. If the USD will continue to appreciate during the day, this might continue to affect the recent rally of gold and silver. On the other hand, the weak correlations of gold and silver with major currencies during July might suggest that the recent reactions of USD will have a short term effect on gold and silver.
U.S Employment Report
Last month the U.S. employment report showed that the labor force rose at a much slower pace than in the past few months, as the number of non-farm employees increased during June by only 18,000 compared with an increase of 25,000 during May. The current expectations are that this trend will continue in July; if this will be the case and we are headed towards another disappointing labor report, the US dollar might change direction and drop which could strengthen gold and silver.
Gold and Silver Outlook:
Gold and silver changed direction yesterday due (in part) to the appreciation of US 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 especially if the US labor report will show no improvement; and if so, the rally of gold and silver is likely to resume..
For further reading:Weekly outlook for August 1-5
Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.
By: Lior Cohen, Energy Analyst for Trading NRG
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.