Gold And Silver Daily Outlook For August 20, 2012

Includes: FXA, GLD, SLV
by: Lior Cohen

The prices of gold and silver moved with an unclear trend during last week, but I suspect bullion rates could trade down during this week. As I have pointed out in the precious metals weekly outlook, the main events of the week will revolve around the U.S core durable goods, minutes of FOMC meeting and EU and China's manufacturing PMI. There are still speculations around whether ECB and Bank of China will issue a stimulus plan; until there will an actual announcement by either bank, it could continue affecting forex and commodities markets. On today's agenda: Minutes of RBA monetary policy meeting.

On Friday, Gold edged up by 0.01% to $1,619.4; Silver declined by 0.75% to $28.09. During August, gold rose by 0.3%; silver, by 0.62%. Furthermore, on Friday the SPDR Gold Shares (NYSEARCA:GLD) also edged up by 0.1% and reached 156.72 by August 10th.

As seen below, the chart presents the changes of normalized prices of precious metals in the last several weeks (normalized to 100 as of July 19th). During the past few weeks gold and silver had a moderate upward trend.

On Today's Agenda

Minutes of RBA's Meeting: The minutes of the recent Reserve Bank of Australia meeting will state the main considerations behind the board's decision to keep the basic interest rate at 3.5%; if the minutes will offer some insight behind its past decision and perhaps the hint of RBA's future steps it may affect the Aussie dollar and consequently precious metals prices.

Currencies/Bullion Market - August Update

The Euro/ USD declined again on Friday by 0.17% to 1.2335. During August (UTD) the Euro/USD hardly didn't change as it edged up by 0.25%. Further, other currencies including the Aussie dollar also depreciated on Friday against the USD by 0.88%. The linear correlation between gold and Euro is still strong and positive: during July and August, the correlation between the gold and EURO/USD was 0.49 (daily percent changes); between gold and AUD/USD, 0.54. Therefore, if these currencies pairs will continue to trade down against the USD, it could also pull down the prices of precious metals.

Daily Outlook

Precious metals didn't do much during most of last week as they both shifted from gains to losses with an unclear trend. This unclear trend, or perhaps even a moderate downward trend, may continue this week especially if none of the major central banks - BOC, RBA, ECB, and FOMC - will announce or at least hint at a stimulus plan to jump-start each respective economy. The upcoming FOMC might disappoint again many bullion traders so that it could result in a decline in precious metals rates. Today's publication of the minutes of RBA might affect the Aussie dollar and, in turn, bullion rates, if the minutes will hint of the board's future steps. Many forex and commodities traders are still waiting for ECB's future steps in pulling the major economies that are struggling with their debt. Finally, if the Euro and other "risk currencies" will trade down during the week they could contribute to the decline of precious metals.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.