Forex Today: Gold and Silver correct from record peaks
Here is what you need to know on Monday, December 29:
While major currency pairs remain relatively quiet ahead of the New Year holiday, Gold and Silver experience sharp fluctuations to start the week. Pending Home Sales for November will be the only data featured in the US economic calendar on Monday.
US Dollar Price This Month
The table below shows the percentage change of US Dollar (USD) against listed major currencies this month. US Dollar was the weakest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -1.41% | -1.89% | 0.08% | -2.14% | -2.47% | -1.48% | -1.72% | |
| EUR | 1.41% | -0.48% | 1.53% | -0.74% | -1.07% | -0.07% | -0.31% | |
| GBP | 1.89% | 0.48% | 2.28% | -0.26% | -0.59% | 0.41% | 0.17% | |
| JPY | -0.08% | -1.53% | -2.28% | -2.25% | -2.57% | -1.59% | -1.87% | |
| CAD | 2.14% | 0.74% | 0.26% | 2.25% | -0.40% | 0.67% | 0.43% | |
| AUD | 2.47% | 1.07% | 0.59% | 2.57% | 0.40% | 1.01% | 0.76% | |
| NZD | 1.48% | 0.07% | -0.41% | 1.59% | -0.67% | -1.01% | -0.24% | |
| CHF | 1.72% | 0.31% | -0.17% | 1.87% | -0.43% | -0.76% | 0.24% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
Following the Christmas break, Gold (XAU/USD) and Silver (XAG/USD) climbed higher and set new all-time highs on Friday. With trading volumes somewhat normalizing and profit-taking kicking into gear, both pairs turn south on Monday. At the time of press, Gold was trading at $4,495 and losing about 1% on the day, while Silver was down 1.5% at $78.15.
In the meantime, US President Donald Trump said over the weekend that they made "a lot of progress" in talks with Ukrainian President Volodymyr Zelenskiy over a possible peace deal but noted that there is no apparent breakthrough on the flashpoint issue of territory and that it might take a few weeks to get it done. After posting marginal losses on Friday, the US Dollar (USD) Index moves sideways in a tight range above 98.00 early Monday. On Tuesday, the Federal Reserve (Fed) will release the minutes of its December policy meeting.
In the early trading hours of the Asian session, the Bank of Japan (BoJ) published the Summary of Opinions from the December monetary policy meeting. The publication showed that some policymakers are in favor of continuing to hike the policy rate, citing inflation concerns and the need to avoid staying behind the curve. After losing more than 0.7% in the previous week, USD/JPY stays under modest bearish pressure early Monday and trades below 156.50.
EUR/USD closed two consecutive trading days in negative territory to end the previous week. The pair stays on the back foot in the European morning on Monday and declines toward 1.1750.
GBP/USD gained nearly 1% last week and registered its highest weekly close since early September. The pair remains relatively quiet on Monday and trades in a narrow channel below 1.3500.
Silver FAQs
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
