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Guest Commentary: Gold & Silver Daily Outlook 10.12.2012

Guest Commentary: Gold & Silver Daily Outlook 10.12.2012

2012-10-12 12:22:00
Lior Cohen: Commodities Analyst for Trading NRG,
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The prices of precious metals remained nearly unchanged as gold rose while the price of silver edged down. U.S jobless claims tumbled down by 30k to 339k this positive news may have contributed to the modest rally in the commodities and stock markets. The modest rally of the Euro may have helped pull up the price of gold. On today's agenda: U.S. Producer Price Index, UoM Consumer Sentiment, Euro Area Industrial Production, and FOMC member Lacker's Speech.

On Thursday, Gold rose by 0.31% to $1,770.6; Silver on the other hand decreased by 0.08% to $34.08. During October, gold fell by 0.19%; silver, by 1.43%.

The ratio between the two precious metals rose on Thursday to 51.95. During October, the ratio increased by 1.26% as silver slightly under-performed gold.

Europe Still Isn't Looking Good

Besides the ongoing weakness of the Euro due to the debt crisis in Spain and the recent grim outlook of the IMF regarding the future economic progress of the Eurozone, the core Euro-zone countries including Germany and France aren't doing well. There are reports that the recent weak economic reports regarding the progress of these countries suggest they aren't doing too well. This means the Euro could remain weak against the USD in the near future, which could also curb the rally of gold and silver prices.

On Today's Agenda

U.S. PPI: In the recent report regarding August this index for finished goods hiked by 1.7% compared with July's rate and rose by 0.5% in the last 12 months; this news might affect commodities;

Euro Area Industrial Production: This report will present the changes in the industrial production of the EU for August; in the recent report the EU industrial production rose by 0.6% (M-O-M) during July;

Currencies / Bullion Market – October Update

The Euro/ USD changed direction and rose on Thursday by 0.42% to 1.2928. Further, several currencies including AUD also appreciated yesterday against the USD. The correlation between gold and Euro remains mid-strong and positive: during September-October, the linear correlation between the gold and EURO/USD reached 0.65 (daily percent changes). The chart below shows the strong correlation between EURO/USD and gold. If the Euro and other risk currencies will resume their downward trend, they are likely to also drag down gold and silver.

Guest_Commentary_Gold_Silver_October_12_2012_body_Correlation_2_October_12.png, Guest Commentary: Gold & Silver Daily Outlook 10.12.2012

Daily Outlook

The modest rally of the Euro and Aussie dollar may have contributed to the little rise in the price of gold. On the other hand, until Spain will make a move regarding making a request for ECB to start its bond purchase program, or Europe will show some signs of recovery the Euro is likely to remain low and thus could further drag along with it precious metals prices. Today's Euro Area industrial production might further affect the forex and commodities markets: if the report won't be positive it could further pull down the Euro. Finally, the U.S PPI could affect the price of gold and silver via the reports effect on the USD.

For further reading: QE3 Is Here, So Why Isn’t Gold Pulling Up?

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

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