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Weekly Gold & Silver Market Recap – 5/17/2013

GOLD CONTINUES DOWNWARD MOVEMENT

Precious Metals prices continued moving lower this week. One of the main drivers in the market this week has come from the massive sell-off of Gold ETFs (Exchange Traded Funds). Analysts at Commerzbank AG reported that another six tons of electronically traded Gold holdings were off-loaded Tuesday, which brings the current tally to 412 tons since the beginning of 2013. Though the recent price drop has caused an onslaught of panic selling in electronic markets, physical demand for Gold coins and bars remains high as investors seek to take advantage of low prices. Another major driver this week was the Federal Reserve’s exit strategy for quantitative easing. Dan Greenhaus of BTIG LLC explained the stock market’s side of things Monday by saying, “In the short term, anything that discusses the Fed’s exit strategy has been associated with market weakness, and today is no exception.” This time of year, the Gold market normally gets support from the wedding season in India. However, this year it has not happened. After a surge of Gold and Silver imports into India in April, the country’s central bank has restricted imports of the metals into the country. Because of the amount of imported Gold and Silver was so large, the county experienced a 72 percent jump in their trade deficit over the previous month. “With India doing its best through taxation to limit Gold buying, the demand from there is not as big as it was the last time we were at these levels," Marex Spectron head of Precious Metals David Govett said. Friday, the Gold price continues to trend downward as the metal is poised for its longest consecutive session losing streak in four years. The central motivator influencing Gold’s decline is the continued speculation surrounding a potential reduction of quantitative easing (QE) and a rising dollar that has nearly reached a three-year high. Coupled with renewed investor optimism regarding the current bullish direction of U.S. stocks, Gold is experiencing a harsh short-term move.

PHYSICAL GOLD BUYERS DON’T TRUST THE NUMBERS

There is a major difference in opinions between physical and electronic Gold investors. While the Gold ETFs have been selling off at a record pace, the physical product has been doing the opposite. Standard Chartered analyst Dan Smith said, “At this point physical demand remains pretty strong, but it's not enough to offset that wider showing by investors.” Consumers of physical Gold usually perceive the market differently as described by Kelly Teoh, market strategist at trading firm IG Markets. “They don't have confidence in central banks, which are just pumping liquidity in the market [eroding the value of money]. There is no conviction in currencies. So it's a very different mindset,” Teoh said. While investors are concerned with the most recent drop in the cost of Gold, many remain positive as several factors point to a bullish long-term outlook for the yellow metal. The stock market rally that has seen the Dow Jones and S&P 500 reach record levels is thought to be overinflated by many analysts and is not supported by macroeconomic fundamentals. Fear of central bank sell-offs of Gold holdings have subsided since the initial panic triggered by rumors of Cyprus liquidating a portion of its reserves to fund a potential bailout. The future prospect of Gold demand in India and the current physical buying frenzy among retail investors worldwide indicate good news for long-term Precious Metals investors. 

At 4:45 pm (EDT), the APMEX precious metals spot prices were:

  • Gold, $1361.20, Down $28.70.
  • Silver, $22.29, Down $0.48.
  • Platinum, $1455.60, Down $31.50.
  • Palladium, $739.50, Down $3.30.

For more APMEX reviews of daily and weekly Precious Metals market activities, visit our News and Commentaries page.

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Disclaimer:
APMEX’s ‘Market Reports’ provide our readers with a review of spot price activity and some of the factors that may be affecting the market for precious metals, three times during the trading day. While the information is obtained from sources we believe to be reliable, we do not guarantee its accuracy or its completeness and we encourage you to conduct your own investigation prior to making any decision based on the information. The "News and Commentaries" are not intended as a comprehensive discussion and there may be other factors that may be affecting the financial marketplace. These "News and Commentaries" are provided for informational purposes only and do not constitute a recommendation by APMEX to hold, to purchase or to sell any precious metal product. All orders, all purchases and all sales, if any, are subject to the terms of the User Agreement and other applicable policies.

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