Guest Commentary: Gold & Silver Daily Outlook 01.17.2012
Gold and silver continue their upward trend of recent weeks despite their decline on Friday's trading. Following the recent downgrade of France and eight other EU countries by the credit rating Standard & Poor's, yesterday the American rating agency cut the rating of the Euro zone's EFSF rescue fund. This news doesn'tseem the affect commodities traders as commodities are traded up. The French debt auction seems to go well as the borrowing costs fell. Today, Euro Area CPI report will be published, the German ZEW economic sentiment, BOC will decide on its overnight rate and Great Britain's CPI.
Gold fell on Friday by 1.03% to reach $1,630.8; silver also traded down by 2% and reached $29.52. During the month, gold inclined by 4.1% and silver by 5.8%.
In the chart below are the normalized gold and silver (gold and silver are normalized to December 30th).
The correlation between gold and silver is still high in January as it was in previous months.
China Grew by 8.9% in the Fourth Quarter
The Chinese economy expanded by only 8.9% during the fourth quarter of 2011 (in annul terms). This growth rate of the Chinese GDP was the lowest growth rate in 10 quarters. This growth rate was higher than what many analysts had expected therefore even though the GDP growth rate was low; it was at least slightly higher than expected. Due to this low GDP growth rate there are speculations that Chinese government may ease the reserve requirements on commercial banks in an attempt to boost the economic growth. If this will be the case, it could boost the economy, but also pressure the inflation. This direction may also positively affect gold and silver.
Forex / Gold & Silver– January
The Euro/USD changed direction again and sharply fell on Friday by 1.05% to reach 1.2680; the recent downgrade of France's credit rating may have affected the Euro to trade down against the USD in Friday's trading. But the current French debt auction seems to go well may keep the Euro strong. If the Euro will appreciate against the U.S. dollar it may also positively affect gold and silver.
Gold and Silver Outlook
Gold and silver declined on Friday, but during most of the month they have had an upward trend. The slow growth in China during the fourth quarter doesn't seem to hold back commodities traders as major commodities prices keep on rising. The recent news of S&P's downgrade of Euro Zone EFSF rescue fund on Monday also doesn’t seem to adversely affect the rally in the financial markets. For the time being it seems that the French debt auction is going well and helps keep the Euro strong. If the Euro will continue to rise against the U.S. dollar and the other financial markets including American stock markets will continue to rise, this may indicate that the recent upward trend of gold and silver will continue during the day.
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By: Lior Cohen, Energy Analyst for Trading NRG
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