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Weekly Gold & Silver Market Recap – 11/22/2013

YELLEN’S COMMENTS SUPPORT GOLD

Last week’s statement from U.S. Federal Reserve Chairman candidate Janet Yellen, in which she shared that the current fiscal policy would remain until healthier economic conditions were seen, provided brief support for Precious Metals that was quickly weakened by profit taking. “People were feeling very bearish before Yellen’s statement,” National Securities Corporation chief market strategist Donald Selkin said. “Her comments were dovish and can be seen as a postponement to tapering, which is definitely helpful for Gold. But, the main reasons why Gold has fallen are intact. Inflation is low, and equity markets continue to march ahead.”

GOLD LOWERS AS PROFIT TAKING CONTINUES

Gold moved lower during Monday trading as investors took advantage of profit taking and equities received a boost, causing a dip in demand for Precious Metals. "Until such time as financial investors — be they short- or longer-term-oriented — return to the market, Gold and Silver will find it hard to make any significant gains,'' Eugen Weinberg, head of commodities research at Commerzbank, said. Further talk from the U.S. Federal Reserve regarding tapering quantitative easing at next month’s meeting could make a difference as to how Precious Metals will perform toward the end of the year. Gold’s main support has somewhat disappeared since the announcement that the Fed may possibly cut back or end the $85 billion monthly bond-buying program once the economy stabilizes.

PRECIOUS METALS FLAT AS INVESTORS LOOK FOR DIRECTION

Gold and Silver prices continued to trade mostly flat throughout Tuesday. While investors waited for the minutes from the Federal Reserve’s October meeting to be released for direction, European Central Bank Vice President Vitor Constancio mentioned quantitative easing as a possibility to help pull the eurozone out of stagnation. James West, portfolio advisor to the Midas Letter Opportunity Fund, said, “The statement was made as only a ‘possibility’ and so I don’t think that in and of itself is going to affect investor sentiment toward Precious Metals in the immediate sense, but I do think such a statement nonetheless provides Gold investors who are long a level of comfort that their investments will ultimately be successful.”

U.S. GOVERNMENT OFFICIALS TO DISCUSS DEBT CRISIS ONCE AGAIN

With the end of the year rapidly approaching, old news is becoming current again. In October, U.S. lawmakers avoided a debt default at the 11th hour and settled continued negotiations over raising the debt ceiling. However, over the next few months lawmakers will again be forced to have the debt ceiling conversation. The Organization for Economic Cooperation and Development (OECD) stated, “An outright default would have extremely severe effects. It would be likely to create large confusion and uncertainty in financial markets given the importance of U.S. government bond rates in pricing financial instruments worldwide and the widespread use of U.S. government bonds as collateral in many financial operations, and trigger a systemic flight to liquidity that could prove as catastrophic and costly as that in the day following the Lehman failure in 2008.”

METALS, STOCKS FALL AFTER FED MINUTES

Precious Metals prices fell Wednesday after the afternoon release of the minutes from the Federal Reserve’s October meeting. Stock futures also plummeted after the release, as the S&P 500’s losing streak extended to the longest in eight weeks. The minutes showed that Fed officials expect economic data to improve to the point where they could begin to taper the quantitative easing (QE) program, possibly by next month. “The battle lines are clearly drawn, with some at the Fed now itching to scale back QE unless the incoming data are awful; the cumulative rise in payrolls since QE3 started is enough for these members. We think [Janet] Yellen is not persuaded of this view but it will be hard for the doves if November payrolls are strong,” Pantheon Macroeconomics chief economist Ian Shepherdson said.

However, some disagree with that assessment. “The market is still expecting a taper next year, not in December of this year,” Wells Fargo Private Bank chief investment officer Dean Junkans said. Peter Boockvar, chief market analyst at the Lindsey Group, added, “Unless we see big upside in the November payroll report, Yellen will take the reins in January with current policy on track and she'll decide where to go from there.”

FED WANTS TO KEEP MARKET GUESSING

The Gold price fell Thursday, still reeling from news that the Federal Reserve could begin to taper quantitative easing as soon as next month. Societe Generale analyst Robin Bhar said of the recent price movement, “This highlights the fact that the market believed there will be no tapering this year and now the Fed says that is not really discounted. The central banks want to keep the market guessing and that uncertainty weighs on the Gold price.” Also weighing on the Gold price is the U.S. dollar, which is at its highest mark in nearly a week. Historically, Gold has a mostly negative correlation to the dollar.

GOLD EXPECTED TO MAKE A COMEBACK

MarketWatch’s Jeff Reeves assembled a list of four reasons that Gold is poised for a comeback. First, he says that global physical demand for the metal is strong, according to the World Gold Council. He also points to the fact that outflows from Gold exchange-traded funds are slowing. Hedge fund managers are also behind the metal, but this last point is perhaps the most interesting. With talk of tapering the current loose monetary policy, Reeves wrote, “Keep in mind that Gold rallied from a low of under $1,200 [per ounce] at the end of June to $1,400 [per ounce] in August on the expectation that tighter monetary policy was on the way. A move like that may be likely again for Gold prices in early 2014.”

PRICES STEADY AS THE WEEK COMES TO AN END

Precious Metals remained flat during trading Friday after having a difficult time finding support in the later part of the week. Further positive U.S. economic data, along with uncertainty about when the Fed will cut back its asset purchasing program, has put pressure on Gold.  The Australia and New Zealand Banking Group, ANZ, said that if Gold falls below the key support of $1,240 per ounce, it is possible it would keep moving toward $1,180 per ounce.

At 3:47 p.m. (ET), the APMEX Precious Metals spot prices were:

  • Gold, $1,246.10, Up $0.00.
  • Silver, $19.94, Down $0.06.
  • Platinum, $1,387.70, Down $5.00.
  • Palladium, $716.90, Up $2.10.

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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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