Guest Commentary: Gold And Silver - Outlook 09.11.2012
The prices gold and silver slipped yesterday along with many other currencies pairs such as the Euro/USD. It seems that the markets are still waiting for the big news items that will come later this week including the German Court ruling on bailout funding and the statement of the FOMC meeting. In the meantime China's trade report showed some signs of slowdown as imports declined, as of August, by 2.6% and exports grew by only 2.6%, while the expectations were 3% growth. This new may have contributed to the decline in commodities prices yesterday. China's new loans report will come out later on today. On today's agenda: Canadian Trade Balance and American Trade Balance.
On Today's Agenda
American Trade Balance: This report for July 2012 will show the developments in imports and exports of goods and services to and from the U.S, including commodities rates; according to the previous American trade balance report regarding June 2012 the goods and services deficit declined during the month to $42.9 billion;
Canadian Trade Balance: In the last report for June 2012, exports edged up by 0.2% while imports increased by 2.3%; as a result, the trade deficit expanded from a $954 million deficit in May to $1.8 billion deficit in June; this report may affect the Canadian dollar which tends to be strongly correlated with precious metals;
Currencies / Bullion– September Update
The Euro/ USD also declined on Monday by 0.5% to 1.2759. Further, other currencies including AUD also depreciated against the USD. The linear correlation between precious metals and Euro is still strong and positive: during August/September, the linear correlation between the gold and EURO/USD was 0.614 (daily percent changes). If the Euro will recover from yesterday's decline it could also pull up the prices of precious metals.
I suspect there will be low volatility during the day as forex and commodities traders are waiting for the big news items of the week: German court ruling (on Wednesday), statement and press conference following the FOMC meeting on Thursday. There are still high expectations of another QE program – following the minutes of the previous FOMC meeting. My guess is that the FOMC won't announce just yet of QE3 even though the market already expects that. Today's publication of the Canada and America's trade balance reports might have some effect on the Canadian dollar and USD, respectively. If these reports will show little progress it could pull down precious metals.
For further reading: On QE3, Google Trends and Gold Price
By Lior Cohen By: Lior Cohen, M.A. in Economics, Commodities Analyst and Blogger at Trading NRG
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