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Weekly Gold & Silver Market Recap – 12/6/2013

GOLD STARTS LOWER AHEAD OF ECONOMIC REPORTS

Economic data continued to pressure Gold as investors awaited the release of key data that was due later in the week. Anticipation of nonfarm payroll numbers, third quarter GDP and manufacturing purchasing managers index (PMI) weighed on metals Monday, pushing Gold down to a one-week low. "We are starting the week and month on a weak footing, carrying on a little bit of the themes that we left last week … the focus is back on the U.S. data, with the nonfarm payrolls on Friday," Saxo Bank senior manager Ole Hansen said. Focus remains on the future of the U.S. Federal Reserve’s monetary easing program. Further optimistic data could influence Fed officials to begin tapering the monthly injections of $85 billion sooner than expected.

While Gold and Silver seemed to suffer from early losses, stock futures traded flat following the Thanksgiving holiday. Along with Gold bugs, equities investors were anticipating economic data as well as earnings from large corporate retailers to gain insight into forthcoming price movement. However, the most important piece of data will be the monthly nonfarm payroll numbers, which are seen as the most integral factor in determining the future of the Fed’s stimulus program.

SHORT-COVERING LEVELS GOLD

The Gold price traded flat Tuesday as a round of bargain hunting and short-covering halted a further decline in the price. Higher crude oil prices and a weaker dollar buoyed Precious Metals as an early morning dip saw Gold fall to its lowest level in five months. Monday’s skid was the largest single day drop in over two months. As is often the case, physical buying increased as lower prices influenced retail investors and central banks in Asia to take advantage of the decline. Following the dip, many investors remain sidelined as they await indications from the Federal Reserve regarding the future of quantitative easing.

GOLD TRENDS UP WITH WEAKER U.S. DOLLAR

Wednesday, Gold made its biggest move in seven weeks as the dollar weakened and technical buying increased. “We saw gold take off as the dollar began its slide,” FuturePath trader Frank Lesh said. “Also, the strength in commodities continues to support gold and with some support coming in from technical buying.” Since November 20, when the Federal Reserve’s October meeting minutes were released speculation has grown tremendously that the Fed could begin tapering soon. This factor has had a negative impact on Precious Metals, which is one of the main reasons for price fluctuation among Gold and Silver most recently.

ECONOMIC DATA PLAYS MAJOR ROLE FOR FED TAPERING

Positive U.S. economic data has been the fuel behind the Fed’s decision to taper its monthly bond buying program with recent manufacturing, technology and housing reports reflecting moderate numbers. “The data are consistent with an ongoing trend of moderate to sluggish growth,” Nuveen Asset Management chief economist Keith Hembre said. “I don’t expect much difference in the narrative, maybe this will be a little better and that will be a little softer, but the broad picture is one of this slow growth environment.”

GOLD GIVES BACK WEDNESDAY’S GAINS

Following Wednesday’s strong one day rally, Gold gave back much of Tuesday’s gains as unemployment benefits claims fell and U.S. GDP showed improvement in the third quarter. These types of indicators are negative for Gold in the short term as investors view them as signs that the Federal Reserve will begin tapering its bullion-friendly quantitative easing program. “The drip-drip stories about possible taper is acting like water torture on the gold prices — incessant and corrosive to confidence,” Ross Norman, chief executive officer at Sharps Pixley, said. “However, if and when done, the impact, we believe, be marginal.” Compared to the massive selloff and resulting price dip that saw the largest two-day drop in 30 years, many analysts and investors already expect an eventual taper and believe this event may be already priced into Precious Metals markets. As the highly anticipated nonfarm payroll numbers are set to be announced this Friday, many investors will remain sidelined until the release of data points to a positive direction for metals prices.

TAPER WOES APPEAR PRICED-IN; GOLD REACTS LITTLE TO JOBS DATA

The Gold price held mostly even Friday as Precious Metals stayed resilient following a strong jobs report. Positive nonfarm payroll data could indicate that the Federal Reserve might be prepared to begin reducing its current level of quantitative easing before year-end. The report “did try to pound the metal, but the support of $1,210 [per ounce] is still very much in play, and this support has pushed the price back up,” AvaTrade chief market analyst Naeem Aslam said. The failure of Gold to fall below key technical support levels indicates that the expectation of a stimulus taper may already be figured into the market and that some of the sell-off could be exhausted. Both stock and Precious Metals investors alike await a time when market movement is dominated by Fed taper speculation. “The unintended consequence of [quantitative easing] is a market more influenced by the tapering timetable guessing game than the fundamentals like macroeconomic factors,” Edmund Moy, chief strategist at Morgan Gold, said.

At 4:45 p.m. (ET), the APMEX Precious Metals spot prices were:

  • Gold, $1,230.70, Down $3.70.
  • Silver, $19.53, Down $0.09.
  • Platinum, $1,358.20, Down $7.30.
  • Palladium, $734.50, Down $2.40.

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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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