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Guest Commentary: Gold & Silver Daily Outlook 01.12.2012

Guest Commentary: Gold & Silver Daily Outlook 01.12.2012

2012-01-12 15:25:00
Lior Cohen, Energy Analyst for Trading NRG,
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Gold and silver rose again in yesterday's trading despite the drop in the other commodities such as oil and the depreciation of the Euro against the USD. Today there is the ECB rate decision which might have a substantial effect on the forex markets. Today, Great Britain Manufacturing Production will be published, Great Britain's rate decision will be made, ECB will announce the interest rate for January, the weekly update U.S. unemployment claims will come out and U.S retail sales monthly report will be published.

Gold moderately rose on Wednesday by 0.50% to $1,639.6; silver also rose by 0.25% to reach $29.89. In the chart below are the normalized gold and silver (gold and silver are normalized to December 30th). During January, gold rose by 4.6% and silver by 7.08%.

Guest_Commentary_Gold_Silver_Daily_Outlook_01.12.2012_body_Gold_price_12.png, Guest Commentary: Gold & Silver Daily Outlook 01.12.2012

Despite the sharp gains of gold and silver during the month, the volatility of these precious metals didn't incline substantially and their standard deviations (of daily percent changes) are similar to the rates recorded in November and December 2011.

Guest_Commentary_Gold_Silver_Daily_Outlook_01.12.2012_body_Standard_deviation__12.png, Guest Commentary: Gold & Silver Daily Outlook 01.12.2012

ECB Rate Decision and Monetary Plan

In today's press conference the President of the European Central Bank, Mario Draghi will announce ECB's basic interest rate for January and perhaps even a quantitative easing plan (yes, just like in the U.S.), these decisions will be made while the EU debt crisis continues to threaten the EU. The recent publication by Eu Stat showing that the Euro Area inflation rate declined to an annual rate of 2.8% (annual terms) in December despite ECB's decision from last month to cut the EU rate to 1.00%, may be among the factors to tilt the odds towards another rate reduction. If ECB will cut again interest rates it is likely to pressure down the Euros /USD and consequently might also affect gold and silver;

On Today's Agenda

U.S. Unemployment Claims:initial claims fell by 15,000 to 372,000 claims for the week ending on December 31st; the number of insured unemployment declined by 22k to 3.595 million during the week of December 24th;

U.S. Retail Sales Report: this report will present the monthly changes in the retail sales and food services for December; in the previous report, the retail sales, when controlling for the price changes, slightly inclined by 0.2% from the previous month; (see here my review of the recent report).

Forex / Gold & Silver– January

The Euro/USD changed direction and declined on Wednesday by 0.56% to reach 1.2706; furthermore, in yesterday's trading the AUD also depreciated against the USD. Today's ECB rate decision will probably affect the Euro especially if there will be a rate cut. In such a case it may also affect the AUD and consequently may also shift the direction of gold and silver.

Gold and Silver Outlook

Gold and silver moderately inclined yesterday but this rally could change direction today if the ECB will announce a rate cut it could have an adverse effect on gold and silver prices. In last month's rate decision, when ECB reduced the rate by 0.25 percent points, gold and silver declined along with the deprecation of the Euro (this relation should be taken with a grain of salt because correlation doesn’t necessarily means causation). Furthermore, if the ECB president will announce a QE plan it could also have a strong effect on the Euro. Finally, the upcoming U.S. reports including retail sales and weekly update on unemployment claims may also affect the forex trading and consequently gold and silver.

For further reading:

Gold and Silver Prices Outlook for January 2012

Weekly Outlook for 9-13 January

Gold and Silver Prices Weekly Outlook for January 9-13

By: Lior Cohen, Energy Analyst for Trading NRG

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