Gold and silver prices are currently falling down after ECB had announced earlier today it will cut interest rate by 25pp to 0.75% - its lowest rate. Following the U.S Independence Day holiday there are many publications and reports that will come out today that could affect the bullion markets. ECB will announce the interest rate for July. Some speculate the ECB could lower the interest rate by 0.25%. Other items on today's agenda: Spanish 10 Year Bond Auction, ADP estimate of U.S. payroll report, U.S. Jobless Claims, and U.S. ISM Non-Manufacturing PMI.
Gold increased on Tuesday by 1.51% to $1,621.8; silver also rose by 2.84% to $28.28. During July, gold rose by 1.1% and silver by 2.42%. Furthermore, yesterday the SPDR Gold Shares (GLD) also rose by 1.52% and reached by July 3rd 157.46.
The chart below shows the normalized rates of these precious metals during the past few weeks (normalized to 100 as of June 20th).
On Today's Agenda
ECB Rate Decision: In previous interest rate decision Mario Draghi left the EU interest rate flat at 1%; some already speculate there might be a rate cut which will affect the Euro/USD exchange rate that is strongly linked with bullion rates;
U.S. Jobless Claims Weekly Report: in the latest report the jobless claims edged down by 6k to 386,000; this upcoming weekly report may affect the U.S dollar and consequently commodities rates;
U.S. ISM Non-Manufacturing PMI: During May 2012 this index edged up to 53.7% - this still means the non-manufacturing is expanding and at a slightly faster pace than before; this index may affect forex and commodities trading;
American Stock Markets / Bullion- July
The S&P500 rose on Tuesday by 0.62% to 1,374.02. The linear correlation between S&P500 and gold has started to pick up and rise. During the last month the linear correlation was 0.54 which is strong and robust. The relation between silver and SNP500 is very similar. These relations however aren't constant and vary over time as indicated in the chart below. Nonetheless if these strong and positive relations will hold up they could suggest that if S&P500 will continue to rally, then bullion rates are likely to follow.
Currencies / Bullion - July Update
The Euro/ USD slightly declined on Wednesday by 0.63% to 1.2528. Further, other rates including the AUD also depreciated on Wednesday. There is still a very high linear correlation between Euro/USD and gold. If the Euro/USD will continue to trade down, it could adversely affect bullion rates.
If ECB will lower the interest rate, this decision could adversary affect not only the Euro/USD, but also bullion rates. The U.S reports including jobless claims and ISM Non-Manufacturing PMI might also affect commodities and forex markets. If these reports won't be positive they may positively affect precious metals.
For further reading: Gold and Silver Monthly Outlook for July
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.