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Guest Commentary: Gold & Silver Daily Outlook 12.14.2011

Guest Commentary: Gold & Silver Daily Outlook 12.14.2011

2011-12-14 15:36:00
Lior Cohen, Energy Analyst for Trading NRG,
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Gold and silver changed direction several times yesterday but eventually didn't do much and only slightly changed. The recent FOMC meeting didn't bring much news as there were no announcements of a new stimulus plan. The market didn't react well to this news as the Euro and gold price declined yesterday. Today, the EU industrial Production report will be published; the USD Import Prices and China's manufacturing PMI will also be published today.

Gold declined on Tuesday by 0.31% to $1,663.1; silver on the other hand inclined by 0.83% to $31.26. The chart below shows the development of gold and silver in December.

Guest_Commentary_Gold_Silver_Daily_Outlook_12.14.2011_body_Gold__14.png, Guest Commentary: Gold & Silver Daily Outlook 12.14.2011

Despite the different directions of gold and silver in recent days, their daily percent changes correlations during December are still high and very similar to the linear correlation recorded in November.

Guest_Commentary_Gold_Silver_Daily_Outlook_12.14.2011_body_Correlation_14_2011.png, Guest Commentary: Gold & Silver Daily Outlook 12.14.2011

FOMC Meeting: No QE3 –Gold is traded down

As I have expected, in yesterday's Federal Open Market Committee meeting, the Committee decided to keep its current monetary policy and didn't introduce a new stimulus plan such as quantitative easing plan three.

The FOMC stated in its statement that the U.S is showing some signs of improvements in the labor market despite the still high unemployment rate. The Committee also still estimates the U.S. economy will grow at a slow pace (in the third quarter the U.S. GDP grew by 2% (Q-o-Q)) in the quarters to come.

This news of no QE3 for the time being may have been among the factors to drag down the precious metals yesterday (at least gold) and may continue to trade down throughout the day.

Forex / Gold & Silver– December Update

The Euro/USD sharply declined again yesterday by 1.14% to reach 1.3037. Other forex exchange rates such as the Australian dollar also depreciated against the USD. The recent decline in the forex markets probably affected gold and silver to decline. If the Euro will continue to depreciate against the USD, they may also further help gold and silver to decline.

American Stock Market / Gold & Silver– Update

The S&P500 slipped yesterday along with the rest of the American stock markets; on Tuesday the S&P500 declined by 0.87% to 1,225.73 – the lowest level since November 29th. The S&P500 and gold and silver are strongly and positively correlated during December (as seen in the chart below), so that if the stock market will continue to decline during the day, it may also indicate that gold and silver are likely to follow and decrease.

Guest_Commentary_Gold_Silver_Daily_Outlook_12.14.2011_body_SP500_J_14.png, Guest Commentary: Gold & Silver Daily Outlook 12.14.2011

Gold and Silver Outlook:

Gold and silver moderately changed yesterday, but they continue their downward trend they have had during most of December. The effect of the recent FOMC meeting that didn't bring a new stimulus plan may continue to linger during the day and may adversely affect not only the Euro trading, but also (and consequently) the gold and silver trading.

For further reading:

Gold and Silver Prices Weekly Outlook for December 12-16

Gold and Silver Prices Monthly Outlook for December 2011

By: Lior Cohen, Energy Analyst for Trading NRG

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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