Gold and silver continued to dwindle yesterday. Earlier today the RBA announced it will cut its interest rate by 0.5 percent point to 3.75%. This rate reduction is larger than many had anticipated. The reason for this sharp cut is due to RBA's concerns over the growth rate of Australia's economy. This is the sharpest rate cut the Bank had done since February 2009. This news already affected the Aussie dollar which is currently traded down. This news might also affect bullion which are strongly correlated with the AUD.
On today's agenda: Great Britain and U.S Manufacturing PMI.
Gold slipped on Monday by 0.04% to $1,664.2; silver also decreased by 1.26% to $31.02. The chart below shows the shifts in both metals during the month (normalized to 100 as of March 30th).
Forex / Bullion– May Update
The Euro/USD slightly decreased on Monday by 0.11% to 1.3239; furthermore, AUD also depreciated on Monday by 0.4%. The recent news of RBA's rate reduction will likely to depreciate the AUD, which is strongly and positively correlated with bullion. This direction of the USD may affect bullion. The chart below shows the development in the moving correlation of AUD/USD and gold (daily percent changes) between October 2011 AND April 2012.
For further reading:
Gold and Silver Prices Outlook for May 2012
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