Guest Commentary: Gold & Silver - Daily Outlook June 22
Gold and silver tumbled down along with other commodities prices such as oil and U.S stock markets. Even the Euro/USD plummeted during yesterday. The FOMC's decision to extend its operation twist by $267 billion until the end of the year and not to introduce another QE program is likely to be among the factors to drag down bullion rates. Further, the Fed updated down its projection of U.S GDP growth from a range of 2.4-2.9 to 1.9-24 for 2012 and for 2013 the projection was cut from 2.7-3.1 to 2.2-2.8. This also may have also contributed to the decline of U.S stock markets and commodities that are strongly correlated with metals. U.S jobless claims edged down by 2,000 during last week; the Philly Fed index plunged to -16.6 in June; U.S existing home sales declined by 1.5% in May. Moody's downgraded 15 of the world's largest banks. These banks include names such as Bank of America, Morgan Stanley and Credit Swiss. Currently gold and silver are decreasing. On today's agenda: German Business Climate Survey, European Council Meeting and Canada's Core CPI.
Gold plunged on Thursday by 3.11% to $1,565.5; silver also tumbled down by 5.24% to $26.9. Yesterday's falls of bullion rates erased these precious metals gains during the month. During the month gold edged up by 0.08% and silver fell by 3.09%.
The chart below presents the normalized rates of these precious metals during June (normalized to 100 as of May 31st). The chart shows how both gold and silver tumbled down and eliminated their rally from the first three weeks of June.
Philly Fed Manufacturing Index Fell to 16.6
According to the recent Philly Fed Manufacturing survey for June the Philly Fed index fell from -5.8 in May to -16.6 in June. Indexes of prices also declined that may suggest the price pressures were moderated. This news may have contributed to the decline in commodities and stock prices.
On Today's Agenda
German Business Climate Survey: In the recent report for May 2012, the business climate index fell from 109.9 in April to 106.9 in May; if this trend will continue, it might adversely affect the Euro;
European Council Meeting: The European Council Meeting will be held in Brussels and the EU ministers of finance will convene and talk about the recent developments in Europe including in Spain, Italy and Greece. If a decision will be made there, it could affect the forex and commodities markets;
Canada's Core CPI: According to the Canadian CPI report for April 2012, the CPI rose by 2% during the past 12 month up to April; the core CPI rose by 2.1% from April 2011 to April 2012. This report might affect the direction of Canadian dollar, which is also strongly correlated with bullion;
Currencies / Bullion Market – June Update
The Euro/ USD fell on Thursday by 1.31% to 1.254. Furthermore, other exchange rates including the AUD and CAD also sharply depreciated against the USD. The sharp fall in Euro and AUD coincided with the plunge in gold and silver prices. If the USD will continue to rise against these currencies, it may pressure down bullion.
Bullion tumbled down yesterday after the FOMC didn't come through with another QE program. The sharp fall of commodities and stocks during yesterday may have also contributed to the downfall of bullion. These falls came after the Fed revised down its projections and the disappointing U.S reports. I speculate bullion will continue to dwindle and shift from gains to losses with little movement especially after such a turbulent day. If the EU council meeting will come up with some headlines it could affect not only Euro but also precious metals.
This gold and silver prices outlook was first presented in Trading NRG
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By: Lior Cohen, M.A. in Economics, Commodities Analyst and Blogger at Trading NRG
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