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Weekly Gold & Silver Market Recap – 12/13/2013

GOLD’S RECENT MOVEMENT A ‘WELCOME SIGN’ FOR INVESTORS

Gold and Silver prices rose slightly during Monday's trading. “The fact that gold failed to fully penetrate its prior lows from last week is a welcome sign for bullish investors. This has helped to prevent it from closing below that long-term bullish trend line around $1,225,” Fawad Razaqzada, technical analyst at Forex.com, said. The overall gains for gold “have so far been capped by a short-term bearish trend line which needs to be broken before we could potentially see a rally of some sort.”

ECONOMISTS BELIEVE THE U.S. ECONOMY WILL MAKE A HEALTHY RECOVERY

The National Association of Business Economics quarterly survey surprisingly reflected an optimistic view from economists who believe the U.S. economy will improve in 2014. It is expected that the unemployment rate will continue to fall next year as 200,000 new jobs will be created each month. The creation of new jobs will provide assistance to households who are looking for some relief to make ends meet and drive spending, which will help boost the U.S. recovery.

The next Federal Reserve policy committee meeting is quickly approaching and is set for December 17-18 with high hopes from investors that tapering will be the main focus. “A small taper might recognize labor market improvement while still providing the [Fed] the opportunity to carefully monitor inflation during the first half of 2014,” James Bullard, the president of the St. Louis Federal Reserve Bank, said. Richmond Fed President Jeffrey Lacker shared his disbeliefs on fiscal policy saying it does not boost economic growth and if the Fed continues to purchase more assets it will only add to the Fed’s balance sheet.

WEAK DOLLAR BOOSTS GOLD

The U.S. dollar fell Tuesday, bumping up Precious Metals and causing Gold to realize its largest single-session bump in almost two months. “The dollar has weakened, so that is helping Gold,” TD Securities head of commodity strategy Bart Melek said. “We had seen some aggressive short positions being taken. Some of that is being taken off as many people feel that Gold isn’t dropping into the precipice. It’s no longer a one-way bet.” With an onslaught of selling over the last two weeks on fears of an imminent U.S. Federal Reserve taper, Gold had experienced a decline that brought the metal down to its lowest level in five months last week. The price drop has since caused a fresh round of bargain buying, both physical and electronically.

U.S. BUDGET DEAL PRESSURES PRECIOUS METALS, STOCKS

Gold dropped Wednesday due to Congress reaching a U.S. budget deal Tuesday evening. This second time around for budget talks seemed to be more successful as lawmakers agreed to fund the government through mid-January. Their approach eliminated the threat of a government shutdown, which many feared would occur again as it had in October. The deal calls for reducing automatic spending cuts and deficit levels by $23 billion over the next two years. Although the agreement was reached in record time, Standard & Poor’s credit ratings agency decided to lower the U.S. growth forecast due to federal spending cuts. "We've lowered our forecast for U.S. GDP growth in light of the additional sequester spending cuts in 2014 as well as the potential for another political standoff in Washington after the October government shutdown," S&P said Monday, ahead of the budget deal.

MARKETS THROWING “TAPER TANTRUM?”

In response to concerns that the Federal Reserve might start scaling back its monetary stimulus efforts in the coming week, the Gold price continued its downward trend in afternoon trading on Thursday, ending the day with just over a $30 drop. According to Naeem Aslam, chief market analyst at AvaTrade, “The odds for a December tapering are at [their] highest level, as the economic data completely warrants for it, and the scale has tilted further [Thursday] after the retail sales data.” Federal Reserve officials are scheduled to meet next week to discuss the future of the central bank’s quantitative easing program. Because the program is believed to have put a drag on the dollar and given a boost to the price of Gold, the possibility that the program will start tapering has pressured Gold’s performance. However, Aslam added, “Gold is also an inflation hedge, and given that the interest rate are expected to stay lower for an extended period of time, tapering is somewhat already getting priced in.”

Along with Gold, the rest of the market seemed to throw a “taper tantrum” Friday, with selloffs of stocks and bonds pushing both the Dow and the S&P 500 down. Janney Montgomery chief investment strategist Mark Luschini sees the current work by Congress to come up with a budget deal as helping fuel the belief that the Fed will taper its monetary efforts starting next week. Luschini said, “These things collectively are setting up the Fed to not have to defer to prospects of fiscal impasses and weak economic data.”

GOLD TO FINISH WEEK HIGHER AS INVESTORS AWAIT FED MEETING

Gold traded higher Friday after a substantial dip yesterday. The yellow metal is set to finish the week in positive territory as investors and traders prepare for the outcome of next week’s Federal Open Market Committee (FOMC) meeting. Some analysts have indicated that improvement in the U.S. economy has been significant enough for the Federal Reserve to announce an initial taper of quantitative easing measures as early as next week following the FOMC assembly. “Taper-talk is dominating the headlines ahead of next week’s Fed meeting and we have seen some pretty wild swings in Comex Gold futures as a result,” Tyler Richey, an analyst for the 7:00’s Report, said.

At 4:00 p.m. (ET), the APMEX Precious Metals spot prices were:

  • Gold, $1,239.90, Up $12.50.
  • Silver, $19.74, Up $0.24.
  • Platinum, $1,364.40, Down $3.00.
  • Palladium, $716.80, Down $3.50.

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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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