Guest Commentary: Gold & Silver Daily Outlook 12.21.2011
Gold and silver sharply inclined yesterday, after they had sharply declined during most of the past few days. The good news from U.S. on the gains in the housing starts and the expectation that ECB will issue additional loans to EU banks helped rally the commodities. Today, the U.S. Existing Home Sales report will be published and the Core Retails Sales of Canada.
Gold sharply inclined on Tuesday by 1.31% to $1,617.9; silver also rallied by 2.29% to $29.54. The chart below shows the shift in the downward trend of gold and silver during most of December. During December gold dropped by 7.6% and silver by 10%.
ECB to Offer Cheap Loans to EU Banks
According to a recent article by Bloomberg, the European Central Bank is planning to issue three year loans at a very low cost to struggling EU banks; analysts estimate the loans to be between €150 billion and €600 billion. This news may will help rally the Euro and consequently positively affect gold and silver.
According to the recent release of the new residential construction statistics for November there was a sharp gain in building permits and housing starts.
Privately owned Housing starts sharply rose during November by 9.3% increase; furthermore, the annual rate for November 2011 was 24.3% above the rate in November 2010.
This news provides a clear positive signal about the progress of the U.S real estate market and may have helped rally the Stock and commodities markets during yesterday's trading (see here the complete review).
On Today's Agenda
U.S. Existing Home Sales: This report will demonstrate the development in U.S. existing home sales during November; in the previous report regarding October the number of homes sold rose; this report may affect the stock and forex markets and indirectly the prices of commodities (see here the recent review);
American Stock Markets / Gold & Silver– Update
The S&P500 sharply inclined on Tuesday by 2.98% to 1,241.30. Due to yesterday's rally, most of the losses of S&P500 during December were erased as it declined by only 0.45% during the month. The S&P500 continue to be strongly and positively correlated to gold and silver prices, so that if the stock market will continue to rally, it may also indicate that gold and silver are likely to follow and incline.
The graph below shows the development of the linear correlation of precious metals and S&P500 during recent months.
U.S. Treasuries / Gold & Silver– December Update
The U.S. 10-year Treasury yield sharply inclined on Tuesday by 0.12 percent points to 1.94% - the highest rate this week; during December the 10 year treasury yield dropped by 0.14 percent point. Furthermore, during December there were positive correlations among the daily percent changes of U.S. 10 year notes yield and gold and silver. If the LT U.S. treasury yield will further rise, it may also continue to pressure up gold and silver. The chart below shows the positive and strong linear correlations of precious metals prices (daily percent changes) with LT U.S treasury yields (daily changes) during December.
Gold and Silver Outlook:
Gold and silver sharply inclined yesterday, as they have started to recover from the sharp declines of last week. The rally in other commodities prices, Forex markets (such as Euro and AUD) and Major American Stock indexes serves to indicate that the gains in precious metals prices were part of widespread recovery. The goods news from Europe of ECB stepping up and issuing additional loans to EU struggling banks helped recuperate the market sentiment and ease some of the speculation on the stability of the EU. The improvement in the U.S. housing starts may have also helped rally the stock and forex markets and thus indirectly help push up gold and silver. If the good news from Europe will continue and the U.S homes sales will also show improvement this may help keep gold and silver rising.
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By: Lior Cohen, Energy Analyst for Trading NRG
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.