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Weekly Gold & Silver Market Recap – 9/20/2013

SUMMERS STEPS DOWN FROM FED CHAIRMAN RACE

The week began with some unexpected news as Lawrence Summers personally removed his name from contention in the race to replace Federal Reserve Chairman Ben Bernanke. Summers has been vocal about the idea of aggressively reducing the scale of quantitative easing, so his withdrawal left his main competitor, Janet Yellen, as the clear front-runner to assume the office of Fed Chairman. “Investors are saying that QE may not be as aggressively dialed back under Yellen, who is now the front-runner,” Walter “Bucky” Hellwig, asset manager at B&T Wealth Management, said. “QE is still a very important factor in the minds of investors and we can see this in the potential movement of the stock and bond markets.” Precious Metals prices adjusted to the announcement, moving slightly up during morning trading. Most analysts predicted a $10-$15 billion reduction from the current $85 billion in monthly asset purchases, Gold bugs and stock speculators alike patiently waited for the possible impact of a potential tapering announcement.

EYES LOCKED ON FOMC OUTCOME TO GAUGE MARKET FUTURE

On Tuesday, the Gold price dipped for the fifth time in the previous six sessions as real inflation numbers have continued to be lower than expected. “With less-than-expected growth in CPI numbers, the appeal of Gold as an inflation hedge is diminished,” Phil Streible, senior commodity broker at R.J. O’Brien & Associates, said. “Tomorrow’s extent of reduction in the stimulus will be very crucial for Gold prices.” However, following a decline that saw Gold drop 21 percent at its lowest point along with expectations for a subtle pull back in the level of monthly monetary injections by the Fed, the potential downside for Gold is expected to be much more limited than the initial plunge in mid-April of this year.

NATIONAL DEBT LIMIT IN QUESTION

The U.S. is headed toward critical times as the nation is nearing its maximum debt limit, requiring Congress to come to an agreement before the country defaults on its debts. U.S. Treasury Secretary Jack Lew stressed to Congress on Tuesday they should not wait until the absolute last minute to make a decision as it could lead to permanent damage to the economy. “We cannot afford for Congress to gamble with the full faith and credit of the United States of America,” Lew told the Economic Club of Washington, a business forum.

METALS JUMP ON FED TAPERING DODGE

The Federal Reserve announced Wednesday their decision to not taper its monthly asset-purchasing program. Within minutes of the statement, Precious Metals quickly turned around from their losses with Gold jumping nearly 3 percent. Due to the condition of the U.S. economy, the Fed proclaimed it was not the right time to make any changes to quantitative easing. “The downside risks to growth have diminished over the past year,” Bernanke said. “However the tightening of financial conditions in recent months, if sustained, could slow the pace of improvement in the economy and labor market.” The sentiment in the market place is more irritated than anything as it was highly anticipated today would be the day for an announcement on tapering. “This is incredibly wimpy,” David Kelly, chief global strategist at JPMorgan Funds, said.

GOLD HIGHER FOLLOWING BERNANKE’S STEADFAST COMMITMENT TO QE

Gold climbed Thursday following Federal Reserve Chairman Ben Bernanke’s announcement that the current scale of monetary easing will not be reduced. “Wow — just as it seems that the Fed had the markets comfortable with tapering, they pull the rug out from everyone,” Richard Gotterer, managing director and senior financial adviser at Wescott Financial Advisory, said. “Now the question is will the Fed prepare the markets for tapering come October, December or wait for the new FOMC chair to control the process?” Technical indicators still show Gold under downward pressure, and major Wall Street firms like Goldman Sachs continue to forecast lower long-term prices. However, the Fed’s commitment to aggressive stimulus measures caused enough fear among investors to drive metals prices up nearly 5 percent during Wednesday’s session.

METALS SHOW EFFECTS OF PROFIT TAKING

Precious Metals prices took a hit on Friday as investors decided to begin profit taking after metals ran with a two day climb. Gene Arensberg, editor of the Got Gold Report said, “So what we’re seeing now is digestion of the surprise knee-jerk reaction on Wednesday — but make no mistake: the game has changed. This is merely a consolidation.

At 5:15 p.m. (ET), the APMEX Precious Metals spot prices were:

  • Gold, $1,327.60, Down $43.70.
  • Silver, $21.82, Down $1.50.
  • Platinum, $1,433.00, Down $41.00.
  • Palladium, $715.40, Down $21.80.

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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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