Forex Magnum

Gold and Silver Update June 25, 2012

Asian equities are trading down by nearly half percent as the European Central Bank announced it would further ease rules on the collateral banks can use in order to secure central-bank funding. The ECB move came with Spain due to formally request aid for its banking sector today, and ahead of this week’s crucial two-day European Union leaders summit, due to start Thursday. Ahead of the summit, reports over the weekend indicated that Greece delegation may present austerity and budget cut plans and may further support down side of base metals due to growing pessimism. In a surprise announcement on the Greek Prime Minister and Finance Minister stated that they were ill and unable to attend the meetings

The euro is trading down and is expected to remain weak in today’s session.

From the economic data front, the US manufacturing releases in the form of Chicago and Dallas may continue to remain weak due to weak demand while the New home sales may increase slightly compared to last month and may further support downside of metals pack.

Gold futures prices advanced near half a percent in early trading while the Asian shares plunged. Although the US equities rose last Friday amid ECB’s loosening rule for banking collaterals, the decision would be fatal for the euro as they were ready to buy the junk rated bonds. However, Germany is strictly opposing the matter as that would raise the tax burden on their investors. The market will therefore be watching the implementation of common Euro bonds and financial transaction tax. Both of these would be a negative factor for the shared currency. The same would have been reflected on a weakening euro at present moment. Therefore expect the early gains in gold would be pared of during the European hours. However, during the US session, reports are expected to highlight the poor manufacturing sector while new home sales are also likely to come down after the mortgage applications fell drastically and cheaper house price index would have demoralized the contractors to start up the projects. This would therefore be a supportive factor for gold prices.

Silver futures prices are also trading at a higher note. During the US session the manufacturing data and housing numbers could be weak which may create pressure on silver as silver falls both in the industrial metals groups as well as the precious metals category so it could be a double whammy.