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Weekly Gold & Silver Market Recap – 5/31/2013

GOLD ON THE MOVE

Gold experienced both ups and downs this week with ongoing speculation over whether the U.S. Federal Reserve would end quantitative easing (QE) earlier than expected.   Even though the physical Gold demand is on the rise, a stronger U.S. dollar has kept pressure on the yellow metal.  Gold continues to be overshadowed by exchange traded funds, which are recording record outflows. A key resistance level for Gold is $1,400 per ounce. Saxo Bank senior manager Ole Hansen said, “We made several attempts at the $1,400 level but, especially the last three, have failed every time. The tug of war continues as the physical market is happy picking up Gold at these levels, but the paper market isn't — they are seeing bond yields up and inflation staying subdued. They're potentially worried that the [U.S.] dollar could have a bit of a renaissance.”

STRONG U.S. DATA CREATES CONCERN IN MARKET

As the U.S. economy continues to reflect a healthy recovery and the dollar appears stronger, investors have noticed that the Gold price (which negatively correlates to the dollar) has felt the pressure. On Tuesday, the Conference Board’s Consumer Confidence Index reported an increase to 76.2 in May, up from 69 in April, reaching its highest point in five years. "Back to back monthly gains suggest that consumer confidence is on the mend and may be regaining the traction it lost due to the fiscal cliff, payroll tax hike and sequester," the Conference Board director of economic indicators Lynn Franco said.

Fear surrounding the longevity of the Fed’s liberal monetary easing program continues to weigh heavily on equities markets as the Dow Jones Industrial Average and S&P 500 retreat from record highs. "The market was at overbought levels and you can see these short-term pullbacks in the market,” Bespoke Group co-founder Paul Hickey said. As stocks posted triple digit losses this week, many analysts and investors continue to speculate what effect a possible end of QE will have on stock and Precious Metals markets.

METALS RISE ON POOR U.S. ECONOMIC DATA

U.S. stock futures held steady while Precious Metals added to gains after Thursday morning’s release of economic data. First quarter U.S. gross domestic product (GDP) figures were revised downward to show a 2.4 percent growth, though expectations were for no change. Also, the weekly jobless claims report showed claims jumped by 10,000, which was more than expected. Precious Metals prices jumped after the news, as the less than stellar economic data points toward business-as-usual for the Fed’s QE program.

The Gold price finally broke through the $1,400 per ounce level and many analysts were looking for the price to hold to show that it has broken through the resistance point. SP Angel analyst Carole Ferguson said, “The fall in equity markets in the past few days shows that there is perhaps some concern that these had moved up too quickly at a time when you also had everyone buying the [U.S.] dollar on expectations of U.S. recovery. I think the reversal of that is what is obviously helping Gold and prices could settle not far from here if the $1,400 level is sustained, which will depend on whether investors continue to buy into risk or not.”

SHORT WEEK ENDS WITH METALS DOWN

As the week and month come to an end, the Gold price continued to struggle with finding support and fell more than 1 percent on mixed U.S. economic data.  "The metals were already under pressure going into the end of the month as many people have a lot of short positions outstanding, and the consumer confidence data just added fuel to selling," brokerage Marex Spectron’s Carlos Perez-Santalla said.

Though the prospects of a slowdown of the QE program have prompted selloffs in equities markets, the Dow Jones Industrial Average and S&P 500 are both in positive territory today after reports indicated that consumer sentiment has reached its highest level in almost six years. Though reassuring economic factors helped modestly boost stocks heading into the weekend, investors remain mindful of the stock market’s primary motivator over the last several months: the $85 billion worth of mortgage-backed securities purchased by the Fed. "All eyes remain on the U.S., analyzing every piece of data to establish if, and when, stimulus measures will be withdrawn — with every piece of bad news being actively welcomed by the market," Interactive Investor’s head of investment Rebecca O’Keeffe wrote in a note.

At 5:10 p.m. (EDT), the APMEX Precious Metals spot prices were:

  • Gold, $1,389.80, Down $24.20.
  • Silver, $22.31, Down $0.49.
  • Platinum, $1,458.20, Down $26.00.
  • Palladium, $751.50, Down $9.10.

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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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