Weekly Gold & Silver Market Recap – 1/25/2013
GOLD ENDS WEEK LOWER; OUTLOOK STILL POSITIVE
On Tuesday the United States financial markets started a shorten week, and Gold prices hit the highest point since Dec. 17 of last year. Early in the day, news of Japan continuing its monetary easing, followed by two different reports from the U.S., gave the market a boost. Existing home sales and weak manufacturing reports from the Federal Reserve were both signs of slowing economic improvement in the country. Gold has been seen as a safe haven for investors during times of economic uncertainty, and Tuesday’s movement supported that sentiment.
Another positive sign for Gold this year has been in physical buying. Gold demand for this time of year is historically low. However, this year has started off with a higher than average demand for the yellow metal. “It was strong in November and that’s normally a usual seasonal pattern that we see coming through from Indian post-monsoon, wedding season buying. The fact that January is as high as we see in November usually, that’s unusual,” Marc Ground, a commodity strategist at Standard Bank in Johannesburg, said. Many experts point to the increased buying from central banks around the world and a change in import taxes on Gold in India as drivers of the higher demand.
There were events this week in the United States that gave reason for the Gold prices to drop. Analysts had expected an increase in jobless claims but the number of Americans filing for unemployment benefits fell to its lowest level since January 2008. This is the second straight week of falling claims. The unemployment rate held steady at 7.8 percent. Although it appears many companies are not laying off workers as anticipated, they are adding new jobs at a slow rate. Additional pressure came against Gold as the U.S. House voted to suspend the nations borrowing limit until May 19 in effect pushing the debt ceiling threat down the road. However, Morgan Stanley is optimistic for the yellow metal with a bright forecast of $1,720 for 2013 and $1,600 in 2014. “We expect that very low nominal interest rates, an ongoing commitment to QE3 and a below-par recovery with attendant pressure on the dollar will still combine to encourage investment buying of Gold,” Morgan Stanley said in the report.
Basically the Gold price “will be underpinned by ongoing accommodative central bank activity and it's quite possible that it will find itself moving into more central banks' portfolios,” according to SP Angel analyst John Meyer. The U.S. Federal Reserve is due to make a statement Wednesday, and analysts believe this will give more clues as to future monetary policy, which has been the main driver of the Gold price recently.
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