Guest Commentary: Gold & Silver Prices - Daily Forecast 09.22.2011
The FOMC decision to purchase $400 billion LT securities is likely to continue affecting in small doses the financial markets throughout June 2012 when the program will end. Gold and silver didn't seem to react to this news yesterday but currently they are traded sharply down as the Euro/USD is traded down as well.
Today, the Euro Area Manufacturing PMI will be published, last week's U.S. Unemployment Claims report and the Canada Core retails sales report.
Gold and silver changed direction again and increased yesterday: Gold rose on Wednesday by 0.06% to $1,808; silver on the other hand inclined by 1.52% to $40.47. During September, gold declined by 1.3% and silver fell by 3.1%.
The ratio between gold and silver reached on Wednesday, September 21st 44.68. During September, gold has slightly outperformed silver as the ratio rose by 1.9%.
FOMC to Purchase $400 billion LT Securities – No QE3
The Federal Open Market Committee decided to purchase $400 billion worth of Long Term Securities in exchange of Short Term Securities to be completed the end of June 2012. This isn't a QE3 because there is no expansion of the Fed's balance. The committee took this decision in a 7-3 vote for it. This action should further decrease the long term securities' yields and help the US government rollover its debt. The financial markets didn't react well to this news as the markets may have considered a more substantial involvement by the Fed and not a relatively small and modest purchase plan.
On Today's Agenda:
Euro Area Manufacturing PMI: In the last report regarding August 2011, the Euro Zone ManufacturingPMI dropped below the 50 point mark. If this report will continue to be negative, it may further pressure the Euro/USD exchange rate to decline in consequently also gold and silver;
U.S. Unemployment Claims: For the week ending on September 10th, initial claims rose by 11,000 to 428,000 claims; for the week ending on September 3rd, the number of insured unemployment was 3.726 million, a decrease of 12,000 compared with the previous week. This report could affect forex traders and thus also gold and silver traders.
Gold and Silver Outlook:
Gold and silver continue to change directions and didn't do much yesterday, but they are currently traded sharply down. The FOMC plan is likely to have little effect on the financial markets in the long run as it might further reduce the yields on long term securities, but during the next couple of days it may further strengthen theUSD, a sequence that might pressuregold and silverto trade down. If the Euro Area Manufacturing PMI will show a slowdown it might further weaken the Euro that may also pressure gold and silver down. For the remainder of the month I speculate thatgold and silverwill slowly recover from their current decline, but will probably finish the month below their initial price levels form the beginning of the month.
For further reading:
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.