Guest Commentary: Gold and Silver Daily Outlook 09.19.2012
Bank of Japan announced it will expand its stimulus by 10 trillion yen (roughly $126 billion) to purchase T-bills and JGBs. This news is likely to help ease the concerns around the progress of Japan’s economy. This news may also positively affect commodities. The prices gold and silver continued their slow movements and edged up despite the sharp fall in the prices of other commodities prices such as crude oil or the deprecation of the Euro and other "risk currencies" during Tuesday. Will this detachment of bullion from the rest of the market continue? On today's agenda: Minutes of the last MPC Meeting, U.S. Housing Starts and Building Permits report, Japanese Trade balance and China's flash Manufacturing PMI.
The rise in movement of both bullion rates is recent weeks is also reflected in a modest rise in the in precious metals prices' volatility during the month: the standard deviations of gold and silver (daily percent changes) reached 0.91% and 1.82%, respectively. For silver, this standard deviation is the highest since April; for gold, this was the highest since July.
On Today's Agenda
U.S. Housing Starts: this report was historically correlated with gold– as housing starts decreased, the price of gold tended to rise the next day (even when controlling to the U.S dollar effect); in the previous report, the adjusted annual rate reached 754,000 in July 2012, which was 1.1% below June's rate;
China flash Manufacturing PMI: this survey covers 800 companies in 20 industries in China; according to the HSBC Manufacturing PMI flash report for August 2012 the Manufacturing PMI fell to 47.8, this means the manufacturing conditions are still contracting in China; if this negative index will continue, this may adversely affect commodities rates;
The anticipation of the Euro market that Spain will make the next move on the debt issue might be among the factors pulling down the Euro along with the rest of the markets. All awhile the Spain bond auction reveals the long term yields continue to rise. The speculations in Asia around the future move of People Bank of China e to stimulus the economy could keep affecting not only the forex markets but also commodities markets. The effect of the FOMC decision from last week is likely to keep having a lingering effect on the bullion market and keep rates high. The upcoming reports to come out regarding the minutes of the MPC meeting, U.S. housing market (existing home sales and housing starts reports), Japan's trade balance and China's manufacturing PMI could affect their respective currency if the reports will demonstrate a significant change as indicated above.
For further reading:Gold & Silver | Outlook for September 17-21
By Lior Cohen By: Lior Cohen, M.A. in Economics, Commodities Analyst and Blogger at Trading NRG
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