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Guest Commentary: Gold & Silver Daily Outlook 08.23.2012

Guest Commentary: Gold & Silver Daily Outlook 08.23.2012

2012-08-23 12:37:00
Lior Cohen: Commodities Analyst,
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The prices of gold and silver continue to rally following yesterday’s publication of the minutes of the FOMC meeting. The minutes revealed that many FOMC members think “monetary accommodation would likely be warranted fairly soon”. This news is likely to shift market sentiment and keep precious metals prices rising. Currently, gold and silver prices are hiking. On today's agenda Flash Euro Area Manufacturing PMI, U.S. Jobless Claims, and Bank of Australia Governor Stevens speaks.

On Wednesday, Gold edged down by 0.15% to $1,640.5; Silver traded up by 0.43% to $29.64. During August, gold rose by 1.6%; silver, by 6.19%.

As seen below, the chart presents the shifts of normalized prices of precious metals in the last several weeks (normalized to 100 as of July 31st). During recent days, both precious metals had a sharp upward trend.

Guest_Commentary_Gold_Silver_Daily_Outlook_August_23_2012_body_Gold__August_23.png, Guest Commentary: Gold & Silver Daily Outlook 08.23.2012

On Today's Agenda

Flash Euro Area Manufacturing PMI: This report will provide an indicator to the progress of the Euro zone and its leading economies' manufacturing conditions; this news, in turn, might affect the Euro/USD and consequently also bullion;

U.S. Jobless Claims Report: in the previous update the jobless claims rose by 2k to 366,000; this upcoming weekly report may affect the USD and consequently commodities;

U.S. New Home Sales: in the previous report the sales of new homes fell to an annual rate of 350,000 – a 8.4% drop (month over month); if the number of home sales will continue to fall, it may further indicate a sign of little recovery, if at all, in the U.S real estate market which may also affect the strength of the USD;

Daily Outlook

The minutes of the FOMC meeting rekindled the hopes that the Fed will issue another quantitative easing plan. It’s not certain how this QE will help the U.S economy because it seems there is a diminishing return with each quantitative easing program. Nonetheless, this program is likely to help rally gold and sliver as both QE1 and QE2 did in recent years. The ongoing rise in the Euro is likely to keep pulling up gold and silver. Today's U.S reports including U.S new home sales report and jobless claims could affect not only the USD but also metals, as indicated above. The report on EU manufacturing PMI could also have a modest effect on the Euro which is strongly linked with bullion rates.

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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