Guest Commentary: Gold and Silver Outlook 09.26.2012
The prices gold and silver remained nearly unchanged yesterday and thus they have both continued their unclear trend from last week. Yesterday, President of Federal Bank of Philadelphia commented on the recent decision of the FOMC to launch QE3. He voiced his concern that this plan may not help rally the U.S economy. U.S consumer confidence rose in September by 9 points to reach 70.3. This news may have helped rally some commodities prices. On today's agenda: German 10 Year Bond Auction and U.S New Home Sales.
On Today's Agenda
U.S. New Home Sales: in the previous report, the sales of new homes rose to an annual rate of 372,000 – a 3.6% gain (month over month); if the number of home sales will continue to rise, it may further indicate a sign of some recovery in the U.S real estate market which may also affect the path of the US dollar;
German 10 Year Bond Auction: the German government will issue another bond auction; in the recent bond auction, which was held at the first week of September, the average rate reached 1.42%;
Currencies / Bullion– September Update
The Euro/ USD continued its downward trend as it fell on Tuesday by 0.25% to 1.2899. Further, other currencies including Aussie dollar also depreciated yesterday against the USD by 0.35%. As indicated in the chart below, there are still strong linear correlations among Euro/USD and precious metals rates: during recent months, the linear correlation between the gold and EURO/USD reached 0.5 and 0.7 (daily percent changes). Following the recent bearish market sentiment towards the "risk currencies", if the bearish market sentiment will continue, it is likely to hold back bullion from rising.
There are reports that ETPs continue to raise their bets on silver as the amount held in ETPs has reached 18,525.76 metric tons which is only 0.6% shy from its record high from last year. This suggests that many bullion traders still have faith in precious metals. Today's German bond auction might partly ease the recent bearish market sentiment in the Euro Area if the auction will go well. Today's publication of U.S new home sales could affect the USD as indicated above. Finally, if the Euro will continue to trade down, this could hold back bullion rates.
For further reading see: Gold and Silver | Report for September 24-28
By: Lior Cohen, M.A. in Economics, Commodities Analyst and Blogger at Trading NRG
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