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Weekly Gold & Silver Market Recap – 8/9/2013

GOLD BATTLES OPTIMISTIC U.S. ECONOMIC NEWS

At the beginning of the week, Gold was struggling to stay above its support level of $1,300 an ounce alongside positive economic data. On Monday, the Commerce Department reported that U.S. manufacturing grew in July at its quickest rate in more than two years. “The economy is healing, and if the economy is healing then it doesn't require the assistance of the Fed,” said John Stephenson, who helps oversee about $2.7 billion (CAD) at First Asset Investment Management Inc. in Toronto. “Whether tapering happens tomorrow or next year, it’s coming, and the market knows it.” The U.S. Federal Reserve’s plan to cutback fiscal policy has been the focal point for investors. The announcement created more confusion in the market as mixed economic data continues to be reported, and investors have no sense of direction the Fed may decide to take.

IS PLATINUM THE NEW GOLD?

Platinum has been making headlines, however, as holdings in exchange-traded funds are at record highs. Commerzbank analysts believe that rising U.S. automobile sales have played a major factor in this, along with supply issues out of South Africa. In 2013, the Platinum price has outperformed the Gold price by approximately 15 percent.

GOLD LOSES MOMENTUM FOR ONLY A SHORT PERIOD

Gold’s price fell below $1,300 an ounce in overnight trading on Monday into Tuesday. Economic data from the U.S. and Europe were the main factors for pulling the Gold price down. Sharps Pixley CEO Ross Norman said, “We fell through the psychological support level of $1,300 last night, and it does feel as the prevailing dollar strength is curtailing Gold momentum. [However,] it is hard to read too much into moves during the summer months as the market can fluctuate widely on very small trades.” Automatic electronic sale orders were activated when the Gold price fell below $1,300, which furthered the impact of the losses.

Wednesday, investors watched Gold fall to the lowest it had been in three weeks as speculation abounded that the U.S. Federal Reserve will start to reduce bond purchases as early as next month. This is the much debated and much speculated topic of tapering. It is inevitable that the Fed will taper their bond buying as the economy has shown signs of improvement; the exact timing is what is unknown. Michael Lewis, head of commodities research at Deutsche Bank, said, “We expect the Fed will taper its asset program from September onwards.”

GOLD RALLIES FROM WEAK ECONOMIC DATA AND DOLLAR

Thursday, Precious Metals received a much needed bounce after the release of the weekly jobless claims report. The report showed that 5,000 new claims were filed, and new claims from two weeks ago were revised upwards. Continuing jobless claims increased by 67,000. The U.S. dollar fell after the report to a seven-week low, leading the way for Gold and Silver to continue their climb. We would have to look back to mid-June to see the last time the dollar was that low. The dip in the dollar was blamed on the current Fed policy and a rise in new jobless claims. The inverse correlation between Gold and the dollar was highlighted on Thursday as the price of Gold rose to the occasion and surged back above $1,300. However, of the Precious Metals complex, the real winner was Platinum. The premium of Platinum, which is used in automobile catalytic converters, rose to a high of $172 per ounce over the price of Gold. The price has been supported by supply threats out of South Africa and a new Platinum ETF in Johannesburg. The new ETF added half a million ounces to its holdings in less than three months.

GOLD REMAINS ATTRACTIVE; STOCK MARKET HAS LOSING STREAK

While Precious Metals saw a day of positive gains Thursday, the stock market faced the first four day losing streak this year. Strong trade data out of China didn’t seem to be enough to push the markets up following a poor weekly jobless report. The Dow may actually see its first losing week in nearly two months. Paul Hogan, manager of the FAM Equity-Income Fund, said, “For a significant move, we need to have some clarity on what the Fed is going to be doing — we need to get to the point where we know when the Fed will be tapering and see that things will be fine economically.” Short of a crystal ball, continued volatility can be expected.

PRECIOUS METALS REMAIN CALM AHEAD OF WEEKEND

The Gold price is fairly level headed into the weekend as a lack of noteworthy economic headlines kept trading volumes low during the traditionally slow summer months. “All in all, traders are not willing to push in either direction, at least before we get more clarity about what the Fed will do,” Credit Suisse analyst Karim Cherif said. As speculation abounds over the timeframe for the Fed to begin scaling back its monthly asset purchases, all interested parties ponder the potential impact the reduction will have on stocks and Precious Metals markets alike.

At 5:22 p.m. (ET), the APMEX Precious Metals spot prices were:

  • Gold, $1,315.50, Up $3.60.
  • Silver, $20.60, Up $0.32.
  • Platinum, $1,502.60, Up $10.00.
  • Palladium, $743.10, Up $3.10.

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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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