Gold and Silver Prices – Daily Outlook for September 18th

Gold and silver changed direction and after they had rallied on Monday, they pulled back down and fell on Tuesday. The FOMC meeting will end today, in which the FOMC will decide on any changes to its policy. If the Fed decides to change its monetary policy by tapering QE3, this could lead to decline in gold and silver prices. Otherwise, gold and silver might change direction again and rally. Besides the FOMC meeting, press conference and economic outlook on today’s agenda: MPC Asset Purchase and Rate Votes, U.S. Housing Starts and Building Permits, and Japanese Trade balance.

Here is a short overview for bullion for Wednesday, September 18th:

Gold and Silver Prices Recap – September Update

On Tuesday, gold fell by 0.64% to $1,309.40; Silver also decreased by 1.04% to $21.75. During September, gold decreased by 6.19%; silver fell by 7.38%. In the chart below are the normalized prices of precious metals for 2013 (normalized to 100 as of August 30th). The prices of gold and silver have declined in recent weeks.

The ratio between the two precious metals rose on Tuesday to 60.22. During September, the ratio increased by 1.29% as silver has slightly under-performed gold.

The gold and silver futures volumes of trade have declined in recent days and reached on Tuesday 149 thousand and 36 thousand, respectively. If the volume rises this week, this could suggest the chances of sudden sharp move in the prices of gold and silver due to high volume will increase.

See here the weekly outlook for gold and silver for September 16-20.

On Today’s Agenda

FOMC Meeting and Press Conference: The FOMC will decide whether it starts tapering QE3. Many analysts expect the FOMC to start taper its long term treasury bonds purchase program by $15 billion a month. The total asset purchase program, in this case, will remain at $70 billion a month. Considering the little effect the treasury bonds purchase program has had on the economy and the slow progress of the labor market, the FOMC might decide to take different measures to stimulate the economy, such as revising up the inflation target, increasing the mortgage backed securities purchase program, or pegging the long term interest rates (10 years) at 2.5%. If the Fed introduces new measures, this could drag back down the USD. If the Fed only reduces QE3, it is likely to pull up USD and drag down gold and silver prices. If the Fed doesn’t introduce any changes to its monetary policy, gold and silver prices might bounce back. In any case, the FOMC’s statement, outlook and press conference that follow are likely to move the forex, stocks and commodities markets;

The table below shows the changes in precious metals prices on the first two days after the FOMC statement was published in 2012 and 2013.