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Guest Commentary: Gold & Silver Daily Outlook 09.12.2012

Guest Commentary: Gold & Silver Daily Outlook 09.12.2012

2012-09-12 12:14:00
Lior Cohen: Commodities Analyst,
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The prices gold and silver didn't do much as the market waits for the two main events of the week regarding the German court ruling on EMS and tomorrow's publication of the FOMC statement. In regards to the court ruling, many anticipate that the high courts will approve the bailout. Yesterday, the American trade balance report came out, both exports and imports declined during July which points to a slowdown in the U.S economy. On today's agenda: Euro Area Industrial Production, German High Court Ruling on EMS and U.S 10 Year Bond Auction.

On Tuesday, Gold rose by 0.18% to $1,734.9; Silver slipped again by 0.2% to $33.57. During September, gold increased by 2.8%; silver, by 6.76%.

Despite the different directions gold and silver took yesterday, the linear correlation between the two precious metals (daily percent changes) is still strong and robust, as indicated in the chart below. During September the linear correlation of their daily percent changes reached 0.852.

Guest_Commentary_Gold_Silver_Daily_Outlook_September_12_2012_body_Correlation__September.png, Guest Commentary: Gold & Silver Daily Outlook 09.12.2012

On Today's Agenda

German High Court Ruling on EMS: The German Court will publish its final ruling on the legality of the Euro bailout fund, European Stability Mechanism (EMS). If the Court will rule in favor of the program it could help stabilize the Euro;

U.S 10 Year Bond Auction: the U.S government will issue another bond auction; in the recent bond auction, which was held at the second week of August, the average rate reached 1.68%;

Currencies / Bullion– September Update

The Euro/ USD hiked on Tuesday by 0.75% to 1.2855. Further, other currencies AUD and CAD also appreciated on Tuesday against the USD. The linear correlation between precious metals and Euro is still positive: during August/September, the linear correlation between the gold and EURO/USD reached 0.57 (daily percent changes). If the Euro will continue to trade up, especially if the German Court ruling will approve the EMS, it could help rally the prices of precious metals.

Daily Outlook

I suspect the volatility will pick up during the day as forex and commodities traders are waiting for the German court ruling statement. Assuming there won't be surprises, this decision is likely to pull up the Euro and consequently gold and silver prices will follow. Today's publication of the Euro Area industrial production might have some effect on the Euro. If this report will show little progress it could pull down precious metals prices. Today the FOMC will commence its two day meetings, and tomorrow the FOMC will publish its decision – whether there will be another QE program.

For further reading see: Gold and Silver Monthly Outlook for September

By: Lior Cohen, M.A. in Economics, Commodities Analyst and Blogger at Trading NRG

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