By Lior Cohen, Energy Analyst for Trading NRG, 25 August 2011 13:40 GMT 
Gold & Silver - Daily Outlook August 25
CME Raised Again Margins on Gold Trading by 27% CME (Chicago Mercantile Exchange), the world’s largest future market, decided to raise the maintenancemargins requirements from $5,500 to $7,000 for trading gold on Wednesday, August 24th by 27% effective after the close of today's business day on August 25th. The initial-margin requirement, or the minimum amount of cash that speculators must keep on deposit, will also incline to $9,450 per 100-ounce contract from $7,425. This is the second time in August that CME raised margins during August: last time, CME raised gold futures trading margins requirements by 22% to $5,500 per contract on Thursday August 11th. This news makes holding gold much less attractive and thus wards off many speculators from the precious metal market. This decision is likely to be one of the prime reasons for the recent sudden shift in gold prices to decline so sharply yesterday. Despite the sharp changes in gold and silver, their correlation of daily percent changes is still strong as seen in the chart below. This also shows that as gold declines silver will soon follow. 
U.S. Durable Goods Report Showed Improvement in July 2011 According to report on US new durable goods manufactures’ shipments and orders for July 2011, there was an increase in orders of durable goods and capital goods compared with June’s. This news might have also brought back some optimism in the progress of US economy. S&P500 / Gold & Silver– August Update The S&P500 inclined again on Wednesday by 1.31%, and thus gained back some of the losses from last week. During August, S&P500 fell by 8.87%. The linear correlation of gold and silver with S&P500 index (daily percent changes) was -0.478 (for gold) and -0.357* (for silver) as of August 24th. If the S&P500 will continue to rise, it may further push down gold and silver. The chart below of the normalized prices of gold, silver and S&P500 index (100= July 29th) show the opposite directions these indexes. 
Gold and Silver Outlook: Gold and silver nearly erased in the past couple of days all the gains they had in August: Gold fell to its level back in August 15th and silver price decreased below its initial price level from the beginning of August. The CME margin hike probably was one of major contributors to push out speculators from holding gold. The speculation around the economic progress of the US and how will it affect the lecture of Bernanke tomorrow in Jackson Hall is high and also may contribute to the changes in gold and silver. The major commodities prices, forex and stock markets indexes are shifting direction as the financial markets are extremely volatile. With such extreme volatility adding a quantitative easing plan might not bring stability to the financial markets. The sharp fall in gold and silver prices might indicate that the market changed its bet that Bernanke won't put the QE3 program on the table tomorrow, but the market has proven to be wrong in the past. Coming tomorrow, it will be much easier to see the direction of gold and silver, if the Federal Reserve chairman will provide a solid answer to his intentions about QE3. In the mean time, gold might lose ground again on the CME margin hike before resuming its slow ascent. Lior Cohen, M.A. commodities analyst and blogger at Trading NRG. http://www.tradingnrg.com/euros-to-us-dollar-u-s-durable-goods-report-rose-in-july-2011/By: Lior Cohen, Energy Analyst for Trading NRG DailyFX provides forex news on the economic reports and political events that influence the currency market.
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