Silver Weekly Fundamental Analysis October 1-5, 2012 Forecast

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Introduction: Silver futures are standardized, exchange-traded contracts in which the contract buyer agrees to take delivery, from the seller, a specific quantity of silver (eg. 30000 grams) at a predetermined price on a future delivery date.

Some Facts about Silver

Silver is a soft, shiny and heavy metallic element with a brilliant white luster. A very ductile and malleable metal, its thermal and electrical conductivity is the highest of all known metals.

Besides being used as a store of value, other main uses of silver include applications in areas such as electronics, photography and as antiseptics.

Consumers and producers of silver can manage silver price risk by purchasing and selling silver futures. Silver producers can employ a short hedge to lock in a selling price for the silver they produce while businesses that require silver can utilize a long hedge to secure a purchase price for the commodity they need.

Silver futures are also traded by speculators who assume the price risk that hedgers try to avoid in return for a chance to profit from favorable silver price movement. Speculators buy silver futures when they believe that silver prices will go up. Conversely, they will sell silver futures when they think that silver prices will fall.

Weekly Analysis and Recommendations:

Silver dipped a bit on Friday after a very positive week which saw the metal break above 34.92 and closed the week at 34.530. Base metals have enjoyed the support from a weaker dollar, as investors confidence in the Eurozone has been bolstered by Spain’s budget reforms released yesterday.

In addition, some weak US data yesterday afternoon (durable goods orders) has enlivened expectations of extended Fed quantitative easing, improving investor interest in commodities and placing a further drag on the dollar. Taking heart from Spain’s 2013 budget announcement, the euro rallied yesterday allowing commodities, especially precious metals to move higher after being pinned down by a strong dollar earlier in the day. The Spanish Prime Minister has stated that the planned reforms go beyond any EU recommendations of austerity. The EU has provisionally endorsed the current plan, adding to market confidence. However, whether the proposed budget targets can be achieved amid an increasingly bleak outlook for Spanish economic growth remains to be seen.

Date

Last

Open

High

Low

Change %

Sep 28, 2012

34.530

34.658

34.923

34.332

-0.38%

Sep 27, 2012

34.660

34.037

34.810

33.948

1.82%

Sep 26, 2012

34.040

33.813

34.105

33.388

0.67%

Sep 25, 2012

33.815

34.055

34.535

33.713

-0.73%

Sep 24, 2012

34.063

34.478

34.485

33.665

-1.22%

Precious metals complex has continued to move upward, despite perhaps some disappoint that the expected Chinese stimulus announcement, ahead of next week’s week-long holidays in China, has not been forthcoming. Perhaps markets are still holding out for some announcement over the weekend. There are reports that Premier Wen is expecting an improvement in the Chinese economy over the coming months, but has also reiterated that the government stands ready to ease policy should Q3:12 data disappoint. To this end, and as we pointed out in yesterday’s Focus, Chinese PMI manufacturing data, due for release early next week, will be particularly important. 

Expect prices to remain buoyant as we head into the weekend, on a mixture of sustained dollar weakness and Chinese stimulus hopes.

FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more recent analysis and information in our weekly reports and we provide daily updates and outlooks.

Major Economic Events for the week of September 24-28, 2012 actual v. forecast for Euro, GPB, the Franc, and USD

Date

Currency

Event

Actual

Forecast

Previous

Sep. 24 

EUR

German Ifo Business Climate Index 

101.4

102.5

102.3

 

EUR

German Current Assessment 

110.3

111.0

111.1

 

EUR

German Business Expectations 

93.2

95.0

94.2

Sep. 25

EUR

GfK German Consumer Climate 

5.9

5.9

5.9

 

GBP

BBA Mortgage Approvals 

30.5K

28.6K

28.8K

 

USD

CB Consumer Confidence 

70.3

63.0

61.3

 Sep. 26

EUR

German 10-Year Bund Auction 

1.520%

 

1.420%

 

GBP

CBI Distributive Trades Survey 

6

5

-3

 

EUR

German CPI (MoM) 

0.0%

0.0%

0.4%

 

EUR

German CPI (YoY) 

2.0%

2.0%

2.1%

 

USD

New Home Sales 

373K

380K

374K

 Sep. 27

EUR

German Unemployment Change 

9K

10K

11K

 

GBP

Business Investment (QoQ) 

0.9%

-1.5%

-1.5%

 

GBP

Current Account 

-20.8B

-12.4B

-15.4B

 

GBP

GDP (QoQ) 

-0.4%

-0.5%

-0.5%

 

GBP

GDP (YoY) 

-0.5%

-0.5%

-0.5%

 

EUR

Italian 10-Year BTP Auction 

5.24%

 

5.82%

 

USD

Core Durable Goods Orders (MoM) 

-1.6%

0.3%

-1.3%

 

USD

Durable Goods Orders (MoM) 

-13.2%

-5.0%

3.3%

 

USD

Initial Jobless Claims 

359K

378K

385K

 

USD

GDP (QoQ) 

1.3%

1.7%

1.7%

 

USD

Continuing Jobless Claims 

3271K

3285K

3275K

 

USD

Pending Home Sales (MoM) 

-2.6%

-0.7%

2.6%

 Sep. 28

EUR

French GDP (QoQ) 

0.0%

0.0%

0.0%

 

EUR

French Consumer Spending (MoM) 

0.4%

-0.1%

0.4%

 

CHF

KOF Leading Indicators 

1.67

1.57

1.59

 

EUR

CPI (YoY) 

2.7%

2.4%

2.6%

 

USD

Core PCE Price Index (MoM) 

0.1%

0.1%

0.1%

 

USD

Personal Spending (MoM) 

0.5%

0.5%

0.4%

 

USD

Chicago PMI 

49.7

53.0

53.0

 

USD

Michigan Consumer Sentiment 

78.3

79.0

79.2

Historical: From 2010 to present

Highest: 49.813 on Apr 25, 2011

Average: 28.468 over this period.

Lowest: 14.655 on Feb 05, 2010

 

Economic Highlights of the coming week that affect the Euro, GBP, CHF and the USD

Date

Time

Currency

Event

Forecast

Previous

Oct. 01 

08:15

CHF

Retail Sales (YoY) 

5.0% 

3.2% 

 

08:30

CHF

SVME PMI 

47.0 

46.7 

 

15:00

USD

ISM Manufacturing Index 

49.8 

49.6 

Oct. 02 

07:00

GBP

Nationwide HPI (MoM) 

0.2% 

1.3% 

Oct. 03 

10:00

EUR

Retail Sales (MoM) 

-0.2% 

-0.2% 

Oct. 04

12:00

GBP

Interest Rate Decision 

0.50% 

0.50% 

 

12:00

GBP

BOE QE Total 

375B 

375B 

 

12:45

EUR

Interest Rate Decision 

0.75% 

0.75% 

Oct. 05

11:00

EUR

German Factory Orders (MoM) 

-0.7% 

0.5% 

Government Bond Auction

Date Time Country 

Oct 01 10:00 Norway 

Oct 02 09:15 Austria 

Oct 02 09:30 Belgium 

Oct 02 09:30 UK 

Oct 02 14:30 UK 

Oct 03 09:10 Sweden 

Oct 03 10:00 Norway 

Oct 04 08:30 Spain 

Oct 04 08:50 France 

Oct 04 15:00 US 

Oct 05 15:30 Italy 

 

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About:FX Empire Analyst - Barry Norman

Barry produces a private Daily Market Review newsletter that is distributed around the globe to over 25,000 subscribers and recently published a book on Options Trading that is available from amazon.com

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