Guest Commentary: Gold & Silver Daily Outlook 07.26.2012
There was a change in pace as precious metals rates bounced back on Wednesday. Yesterday it was reported that, in Q2 2012 Great Britain's Gross Domestic Product contracted by 0.7%. This news may have contributed to the rally the Euro and weakened the GBP. The rally of the Euro during yesterday coincided with the recovery of major commodities rates including oil and gold prices. New home sales declined by 8.4% during June (M-o-M). This news may have also positively affected precious metals rates. On today's agenda: U.S. pending Home Sales, U.S Core Durable Goods, U.S. Jobless Claims Weekly report, Euro Area Monetary Development.
Gold hiked on Wednesday by 2.02% to $1,612.7; Silver also rose by 2.44% to $27.47. During July, gold rose by 0.53% while silver declined by 0.53%.
In the chart herein are the normalized rates of these precious metals during the month (normalized to 100 as of June 29th). As seen yesterday's rally puts gold and silver very near their starting point from the beginning of the month.
On Today's Agenda
U.S. Jobless Claims Weekly Report: in the latest update the jobless claims rose by 34k to 386,000; this upcoming weekly report may affect the U.S dollar and consequently precious metals rates;
U.S. Pending Home Sales: in the latest report the pending home sales index rose by 5.9% (M-over-M). These data are another indicator for the development in America's real estate market; based on last week's results on housing sales (existing) the pending sales may change direction and decline.
Currencies / Bullion Market – July Update
The Euro/USD hiked on Wednesday by 0.8% to 1.2158. Further, other currencies including AUD and CAD also appreciated on Wednesday against the USD. The correlations between gold and the above-mentioned exchange rates remain strong: during July the correlation between the gold and EURO/USD reached 0.69 (daily percent changes); the relation between silver and EURO/USD reached 0.65. Therefore, if the Euro and AUD will continue to rally, they may also pull up precious metals rates.
The recovery of the Euro that may have contributed to the rise in bullion rates might be short lived. Unless there will be some positive reports coming from the EU, I suspect the direction will reverse during today's trading. The upcoming U.S reports including core durable goods, pending home sales, jobless claims could signal the progress of the U.S economy and in turn may affect the strength of the USD. If there will be substantial changes from the previous reports, then they may also affect bullion rates. Keep in mind that if the USD will continue to appreciate, it could raise the chances of the FOMC intervening in the market with another QE program that will depreciate the USD.
For further reading: What Are the main factors Affecting Gold Price?
By: Lior Cohen, M.A. in Economics, Commodities Analyst and Blogger at Trading NRG
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