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Guest Commentary: Gold & Silver Daily Outlook 12.13.2011

Guest Commentary: Gold & Silver Daily Outlook 12.13.2011

2011-12-13 15:11:00
Lior Cohen, Energy Analyst for Trading NRG,

Gold and silver started the week with very sharp losses; many commodities prices, stock indexes and forex exchange rates also sharply declined yesterday. This reaction was probably prompted by the markets' disappointment from the recent EU Summit. Moody's announcement to reconsider all EU countries credit rating may have also helped push down the financial markets. Today, the FOMC meeting will be held, U.S. retail sales report will be published and GB's CPI will be reported.

Gold sharply declined on Monday by 2.83% to $1,668.2; silver also declined by 3.88% to $31.00. The chart below shows the development of gold and silver in December.

Guest_Commentary_Gold_Silver_Daily_Outlook_12.13.2011_body_Gold_p_13.png, Guest Commentary: Gold & Silver Daily Outlook 12.13.2011

EU Summit Dragged the Markets Down – Moody's May Revise Credit Rating

The market didn't react well to the agreement struck among many EU countries; the agreement was reached over the weekend in the recent EU summit.

Moody's also reacted to this agreement and stated that it will review all the EU's countries credit rating and may revise it down. This news was probably also among the factors to drive the commodities markets down including precious metals market.

On Today's Agenda

FOMC Meeting (Statement): The upcoming FOMC meeting might bring some new developments especially if the Fed Chairman Bernanke will eventually add a new program to the recent FOMC $400 twist plan that was announced back in November. The FOMC meeting could affect gold and silver;

U.S. Retail Sales: this report will refer to November; in the October report, the retail sales, when controlling for the price changes, moderately increased by 0.5% from the previous month; this report could affect commodities traders (see here my review of the recent report).

U.S. Treasuries / Gold & Silver– December Update

The U.S. 10-year Treasury yield declined on Monday by 0.04 percent points to 2.03%; during December the 10 year treasury yield dropped by 0.05 percent point. Furthermore, during December there were positive correlations among the U.S. 10 year notes yields and gold and silver (see chart below). If the long term U.S. treasury yields will continue to decline, it may pressure gold and silver to decrease as well.

Guest_Commentary_Gold_Silver_Daily_Outlook_12.13.2011_body_Correlation_13.png, Guest Commentary: Gold & Silver Daily Outlook 12.13.2011

Gold and Silver Outlook:

Gold and silver started the week with sharp falls; this shows that the calm and moderate changes of last week are replaced with sharp changes. Today's FOMC meeting and the US retail sales could rally the precious metals prices especially if Bernanke will hint of the possibility of another QE program. I speculate the FOMC won't come up today with another stimulus plan since the U.S. economy starts to show some signs of improvement and the fiscal problems including the budget cuts have yet to be resolved in Washington. Thus, following the sharp falls from yesterday (and all things being equal with no new development related to the EU debt crisis) I speculate the market may correct for the sharp falls and gold and silver to bounce back and moderately incline.

For further reading:

Gold and Silver Prices Weekly Outlook for December 12-16

Weekly Outlook for 12-16 December

By: Lior Cohen, Energy Analyst for Trading NRG

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