Guest Commentary: Gold And Silver Outlook 09.13.2012
The prices gold and silver didn't do much again on Wednesday despite the publication of the German court ruling on EMS that approved the bailout. The next step will be to wait for Spain to officially request a bailout. Currently the prices of gold and silver are slipping. On today's agenda: statement of the FOMC Meeting, Swiss National Bank rate decision, SNB Press Conference, U.S. Jobless Claims Weekly Update, U.S. Producer Price Index, Italian 10 Year Bond Auction and GB 10 Year Bond Auction.
On Wednesday, Gold edged down by 0.07% to $1,733.7; Silver also slipped by 0.82% to $33.29. During September, gold increased by 2.73%; silver, by 5.88%. As seen below, the chart shows the shifts of normalized prices of precious metals in the past couple of weeks (normalized to 100 as of August 31st). During the month, gold and silver have traded slightly up.
On Today's Agenda
Statement of FOMC Meeting: Following the speech of Bernanke and the minutes of recent FOMC meeting, it seems that the market has already concluded that there will be another QE program in the near future. Further, the recent depreciation of the USD, the low growth rate in employment and GDP for Q2 are also adding to the chances of another QE.
U.S. PPI: In the recent report regarding July this index for finished goods rose by 0.3% compared with June's rate and increased by 0.5% in the last 12 months; this news might affect bullion;
U.S. Jobless Claims: in the recent report the jobless claims declined by 12k to 365,000; this upcoming weekly update may affect the U.S dollar and consequently the rates of commodities;
The prices of bullion didn't do much again but this might change today as the FOMC meeting will be concluded today and will reveal its decision. I still guess the FOMC won't reveal QE3 just yet. If the statement will allude to the fact, however it could keep bullion rates up mainly if Bernanke will offer some insight other than the usual "keeping all options on the table" speech. Otherwise there could be a sharp market reaction that will drag down not only the Euro/USD but also bullion rates. There are other monetary policies the Fed might try such as pledging to keep long term yields ( ten years and more) below a certain percent –say for 10 year bonds, pledge to keep yields below 2.5% - or raising the inflation target to 3%-4%. These options might also affect bullion rates. But it's not clear how they will affect precious metals compared to QE3. After all, Bernanke's operation twist (raising the maturity of debt and pulling down long term yields) didn't seem to affect much bullion. The pledge of the Fed to keep rates low until late 2013 and then until late 2014 seem to have a strong effect on the bullion market but also not as QE1 and QE2 had on precious metals.
For further reading:Gold And Silver Outlook for September
By Lior Cohen By: Lior Cohen, M.A. in Economics, Commodities Analyst and Blogger at Trading NRG
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