The prices of gold and silver changed direction again and sharply increased yesterday. Precious metals' rally coincided with the rise in other related markets such as oil, stocks, and Euro. The renewed optimizing regarding the progress of Congress in dealing with the fiscal cliff may have contributed to the rise in markets. This optimism, however, might quickly turn in the days to follow. On today's agenda: Euro-group Meeting, Bank of Australia Governor Stevens speaks, U.S. Housing Starts and Building Permits, Bernanke's Speech and Japanese Trade balance.
On Today's Agenda
Euro-group Meeting: Following last week's meeting, the EU ministers of finance had decided to make the decision regarding Greece's next bailout package; there might be, however, another delay in the EU leaders' decision on Greece. In such a case, it may pull back the Euro again;
Bernanke's Speech: In preparation for the government tackling the fiscal cliff by the end of 2012, many will look towards Bernanke's speech that could offer some insight behind the Fed's future monetary steps. There were some reports that suggest there is renewed optimism regarding the budget cut. The Chairman of the Federal Reserve will give a speech at the Economic Club of New York. The title of the speech is "The Economic Recovery and Economic Policy ";
Currencies / Bullion Market – November Update
The Euro/ USD also rose on Monday by 0.56% to 1.2814. Moreover, some currencies such as Aussie dollar also appreciated during yesterday against the USD by 0.7%. This trend might have contributed to rise of bullion prices yesterday. As seen in the table below, the correlations among gold, Euro and Aussie are mid-string and robust: during November, the linear correlation between gold and AUD /USD reached 0.6 (daily percent changes). Thus, if the Euro and other risk currencies will change direction and fall against the USD, they are likely to pull down gold and silver.
The prices of gold and silver rose yesterday along with the rest of the market including stocks, oil and Euro. This rally, however, might change direction and pull back; yesterday's sharp gain was perhaps an over reaction and speculation around the progress in Europe regarding the Greek debt problem, and budget talks in the U.S. Today the EU group will meet again. If the EU Group meeting will result in approving the next Greek bailout, it could pull up the Euro. There are speculations, however, that the EU leaders will delay their decision to the next Summit.
For further reading: Gold And Silver Outlook For November 19-23