Weekly Gold & Silver Market Recap – 2/01/2013

GOLD ENCOUNTERS SOME KEY FACTORS THIS WEEK

The week began with a slight downward movement in Precious Metals prices as the U.S. dollar regained some ground against foreign currencies. The market anticipated a shift in prices from a heavy slate of U.S. data that was released throughout the week along with the Federal Reserve announcement on further stimulus measures. Investors were being cautious as they awaited news on the Fed’s QE program. MKS Finance's head of marketing, Frederic Panizzutti, said, “The market is on hold ahead of the U.S. Federal Reserve's meeting, and expects comments on further quantitative easing measures.”

Consumer confidence levels fell to 58.6 for the month of December, below economists’ prediction of 64. Consumer concern comes after U.S. politicians reached an agreement to avoid the fiscal cliff, which increased taxes for many Americans and left budget decisions to be handled at a later date. “The increase in the payroll tax has undoubtedly dampened consumers' spirits and it may take a while for confidence to rebound and consumers to recover from their initial paycheck shock,” Lynn Franco, director of economic indicators at The Conference Board, said in a statement.

THE FED CONFIRMS THEY WILL CONTINUE WITH THEIR BOND BUYING PROGRAM

Precious Metals reacted Thursday morning to investors frustrated by Gold’s movement Wednesday after the Fed announced they would continue their bond buying program. Analysts suggest Gold moved ahead of the anticipated statement from the Fed as the bond buying had been forecasted. Investors are patiently waiting Friday’s nonfarm payroll data to show how the U.S. labor market is performing. “The intense focus on employment means that this Friday's report remains crucial in forming market expectations on future policy,” UBS analyst Joni Teves said in a report. “Some adjustments to positioning are likely to emerge heading into tomorrow.”

GREAT NEWS FOR THE STOCK MARKET

The U.S. stock market is close to experiencing its best performance since 1989. “Today, traders will be looking toward tomorrow’s monthly employment report, thus holding back funds earmarked for equity purchases until they see how many jobs the economy created during February,” Fred Dickson, chief investment strategist at Davidson Companies, said.

THE WEEK ENDS WITH DISAPPOINTING U.S. DATA

Gold and Silver prices jumped this morning after the release of U.S. payrolls data. In a report before the release, UBS said, “Current price levels, which are essentially where Gold hovered before the U.S. GDP print, suggest that expectations are once again skewed towards positive payrolls figures.” The prices of Gold and Silver were both flat before the data, so investors seem to be disappointed by the report.

Employment grew in January; however, it was not enough to offset the unemployment rate’s increase. The economy added 157,000 nonfarm jobs, but unemployment increased to 7.9 percent. One likely reason this affected Gold and Silver is that the Federal Reserve is unlikely to make any changes to its very accommodative monetary policy with that news. The Fed has set actual goals for the unemployment rate – 6.5 percent – and quantitative easing is expected to continue until the unemployment rate hits that figure.

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