Guest Commentary: Gold & Silver Daily Outlook 08.17.2012
The prices of gold and silver, much like many other commodities prices, rose again on Thursday and thus completed a second straight day of gains. The U.S housing starts declined during June while the number of building permits increased. U.S. jobless claims remained nearly unchanged at 366k. The Philly Fed Index rose again for the August survey but was still negative, which means the manufacturing conditions aren't expanding. Nonetheless this news may have contributed to the rally in commodities and stock markets. Will this rally continue today? On today's agenda: Canada's Core CPI, and UoM Consumer Sentiment.
As seen below, the chart presents the shifts of normalized prices of precious metals during the month (normalized to 100 as of July 31st). During August, gold and silver edged up.
On Today's Agenda
Canada's Core CPI: This report will refer to the core consumer price index for July 2012 and controlling the volatile components such as energy, fruit and vegetables. According to the previous report, the CPI rose by 1.5% during the past 12 months up to June. This report might affect the Canadian dollar, which is also strongly correlated with bullion;
UoM Consumer Sentiment (preliminary): University of Michigan will issue its preliminary consumer sentiment survey; this report could offer another perceptive to recent changes in U.S consumers sentiment about the economy; in the last report the sentiment index fell to 72;
Currencies / Bullion Market –August Update
The Euro/ USD rose on Thursday by 0.54% to 1.2356. Further, other currencies including AUD and CAD also appreciated against the USD. The linear correlation between gold and Euro is still robust: during the past several weeks, the correlation between the gold and EURO/USD was 0.492 (daily percent changes); the correlation between gold and AUD/USD was 0.54. Therefore, if the Euro and Aussie dollar will continue to rise against the USD, it could also pull up precious metals.
There aren't too many news items on today's agenda so the recent rise in bullion prices could continue today. There are some reports that have some effect on precious metals rates as indicated above. Finally, if the Euro, Aussie dollar and other "risk currencies" will continue to increase against the USD it could contribute to the recovery of precious metals.
For further reading: On the Relation between QE Programs and Gold
By: Lior Cohen, M.A. in Economics, Commodities Analyst and Blogger at Trading NRG
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