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Weekly Gold & Silver Market Recap – 7/19/2013

METALS FEEL PRESSURE FROM U.S. DATA; INVESTORS AWAIT BERNANKE’S TESTIMONY

The week began with a stronger dollar, rising ahead of U.S. retail sales data, which put pressure on the Gold price. Danske Bank analyst Christin Tuxen said, “There is expectation that U.S. retail sales may be a fairly good number following the steady improvement we have seen in the past few months, which of course could add to the picture that will impact on the Fed's decision to taper stimulus.” The Gold price’s rise last week was due in part to U.S. Federal Reserve Chairman Ben Bernanke’s comments supporting continued easing for the foreseeable future. Tuxen continued to say, “The main focus is Bernanke's testimony to the Congress [Wednesday and Thursday], and that should really give us more guidance to whether tapering will start in September or December.”

Jim Rickards, managing director of Tangent Capital, believes that if the Fed begins to taper its quantitative easing (QE) program later this year, the central bank will quickly reverse course (by early 2014). He also believes that tapering will happen in September or not at all. “If they taper, it will be at [a Federal Open Market Committee] meeting with a press conference because the move is so significant the Fed will want the press conference to explain very carefully what they have done … However, if the Fed does taper in September, they will find the economy sinks much faster than expected and … they will have to increase asset purchases by early 2014.”

Mid-week, in preparation for Bernanke’s Congressional testimony concerning the future of QE, the dollar weakened while Gold went up.  The market expected Bernanke to reiterate his comments made last week assuring the perpetuation of QE in the immediate future. Gold reacted somewhat favorably to the weaker dollar as traders and investors alike looked to Wednesday for significant comments to influence price movement in stock and Precious Metals markets.

BERNANKE ANNOUNCES FED PLANS TO BEGIN TAPERING BOND BUYING

Bernanke began his semiannual monetary report before Congress on Wednesday, where he confirmed that, if the U.S. job market continues to strengthen and inflation moves closer to the targeted range of 2 percent, the bond buying program would be moderated later this year. He added that that could change depending on incoming economic data. During the Q&A portion of the testimony, Bernanke shared his thoughts on why it was best to inform the market of the Fed’s plans. He believes that if the plans were not shared, it could have created an uncertain financial market with investors possibly taking extremely risky positions. “Markets are beginning to understand our message and the volatility has obviously moderated," Bernanke said.  Precious Metals felt pressure from the news and all took a dip in price. 

INVESTORS TAKE ADVANTAGE OF BUYING OPPORTUNITY

Gold slowly showed a recovery on Thursday during Bernanke’s second day of testimony, correcting itself to the news that fiscal policy would indeed be tapered in the near future. Thursday’s price increase marked the seventh session out of nine that Gold ended the day higher. Gold continued to hold steady around $1,280 per ounce as many investors are still taking advantage of lower prices. “As the metal shows a bit of resiliency lately, many seem to be unwilling to pass on a bargain price,” Citringroup founder and executive chairman Jonathan Citrin said. “Some prices are just plain hard to resist.” Referencing Gold’s recent resilience, Citrin added that Gold “may have reached a technical bottom in the emotional eyes of traders.” As it appears Bernanke favors prolonging economic stimulus measures rather than prematurely reducing the current scale, many analysts continue to view Gold as a strong alternative to the U.S. dollar.

GOLD FINDS SUPPORT TO END WEEK

This week ends with stocks struggling and Gold gaining for its second positive week in a row. Though the move upward is not as vigorous as many investors would like, a weaker U.S. dollar and lower equities figures have traditionally been positive for the yellow metal. Following Bernanke’s Congressional testimony this week, Gold received support as it became clear that quantitative easing will remain unaltered for the time being. Though Bernanke alluded to the recent difficulty in predicting price patterns for Gold, many experts have referenced a drop in overall Gold production along with strong physical demand in Asia as two key mechanisms providing support for the metal.

At 4:41 p.m. (ET), the APMEX Precious Metals spot prices were:

  • Gold, $1,297.80, Up $10.60.
  • Silver, $19.55, Up $0.07.
  • Platinum, $1,430.10, Up $15.30.
  • Palladium, $747.00, Down $1.50.

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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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