Guest Commentary: Gold & Silver Daily Outlook


On Wednesday the prices of gold and silver edged up after they had declined during the first two days of the week. The bullion market continues to seek direction as both metals nearly didn’t change during the month. The U.S CPI remained unchanged during July while the core CPI edged up by 0.1%. On today’s agenda: GB Retails Sales, U.S. Housing Starts and Building Permits, U.S. Jobless Claims, and Philly Fed Manufacturing Index.

On Wednesday, Gold edged up by 0.28% to $1,606.6; Silver also edged up by 0.18% to $27.9. During August, gold declined by 0.5%; silver, by 0.06%.

The ratio between the two precious metals rose on Wednesday to 57.59. During August the ratio edged down by 0.43% as silver slightly out-performed gold.

On Today’s Agenda

Philly Fed Manufacturing Index: This monthly survey measures the manufacturing conditions. In the previous July survey, the growth rate rose from -16.6 in June to -12.9 in July. If the index will remain negative it may adversely affect not only U.S Dollar but also commodities;

U.S. Housing Starts: this report was historically correlated with gold– as housing starts increased, gold tended to fall the following day; in the previous report, the adjusted annual rate reached 760,000 in June, which was 6.9% above May’s rate;

U.S. Jobless Claims Weekly Report: in the recent update the jobless claims fell by 6k to 361,000; this upcoming weekly update may affect the U.S dollar and consequently precious metals rates;

Currencies / Bullion Market –August Update

The Euro/ USD edged down again on Wednesday by 0.26% to 1.229. Alternatively, other currencies including Aussie dollar and CAD appreciated on Wednesday. The linear correlation between gold and Euro is still strong and positive: during the past several weeks, the correlation between the gold and EURO/USD was 0.49 (daily percent changes). Therefore, if the Euro will continue to fall against the USD, it could also drag down precious metals.

Daily Outlook

The ongoing decline of the Euro is probably curbing the rise of precious metals, while the increase in other “risk currencies” such as Aussie dollar and CAD is helping bullion rates to edge up. The upcoming U.S reports that will come out today including the housing starts and Philly Fed could affect not only bullion market but also stocks and forex markets. If the housing starts will continue to rise and if the Philly Fed index will continue to be negative, then precious metals prices may resume their downward trend. The change in market sentiment in which major hedge funds become less bullish on silver may also contribute to the weakness of precious metals. Finally, if the Euro and other “risk currencies” will fall against the USD it could contribute to the weakness of precious metals rates.