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Weekly Gold & Silver Market Recap – 1/17/2014

GOLD STEADY AFTER FRIDAY RALLY

Gold traded even Monday morning following last Friday’s weak payroll data which pushed the yellow metal to its highest level in one month. "There was some follow-through buying from Friday’s job report and rotation from equities to gold," Alliance Financial LLC., head precious metals dealer Frank McGhee said. As Gold steadies, the Federal Reserve’s reduction of monetary stimulus measures still looms heavily as the release of December’s Fed meeting minutes suggests quantitative easing could completely cease by the end of 2014. Precious Metals will continue to seek a solid footing as many investors wonder if the sell-off witnessed during 2013 has halted, creating a new opportunity for upward movement as physical buying of Gold and Silver remains strong.

GOLD’S MOMENTUM REMAINS

Several big banks provided their 2014 outlook for Gold. Some have positive outlooks, while others are negative on the yellow metal as the U.S. economy continues to strengthen. Sharps Pixley expects Gold to have a Goldilocks year, meaning it will perform just right, with an average of $1,274 an ounce and a high of $1,350 an ounce. “It feels like the market just might be on the turn; much of the Gold negative news is in the price and investor appetite seems to be insatiable at these levels,” Sharps Pixley chief executive officer Ross Norman said. “Besides, with oil above $100 a barrel, we should of course be closer to the $1,600 [an ounce] level. Perhaps that’s for 2015.”

CRUDE OIL DECLINES ON GEOPOLITICAL TENSION

Crude oil supply concerns continued to grow Monday as oil futures closed below $92 per barrel. The Federal Reserve’s decision to taper its quantitative easing program has already affected crude oil prices and news of developing geopolitical tension in Iran is not helping the matter. There is an agreement currently in place between Iran and six world powers that caps Tehran’s nuclear program in exchange for easing sanctions on Iran. If the arrangement remains and provides sanctions on Iranian oil, “then the prospect of approximately 1 million barrels a day returning to the global market at some undetermined point this year would weigh on prices,” Matt Smith, author of energy and financial-market newsletter The Daily Distillation, said Monday.

QE EXPECTATIONS PRESSURE GOLD

The Gold price was down from a one-month high Tuesday as ongoing speculation surrounding a reduction in Fed stimulus measures strengthened the dollar and weighed on Precious Metals. “Gold is under pressure because of the good economic recovery outlook,” Frank Lesh, a trader at FuturePath Trading, said. “The dollar strength is working against prices.” A poor non-farm payroll report coupled with physical buying of Gold and Silver had been instrumental in lifting prices in the last week. However, sinking near-term inflationary concerns and a booming stock rally have caused short-term metals investors to temporarily suspend their demand for Gold. Even with Tuesday’s minor retreat, the yellow metal appeared to be range-bound as global economic news has yet to be jarring enough to rattle prices from their current levels.

ECONOMIC FIGURES PUSH S&P TO RECORD HIGH

Strong domestic manufacturing data and upbeat corporate earnings figures assisted in driving U.S. stocks Tuesday as the S&P 500 reached a new record high. "For those suggesting the market 'needs' earnings growth or something along those lines, we'd point out that is exactly what is occurring," Dan Greenhaus, chief strategist at BTIG, said. Greenhaus and other experts expect the release of fourth quarter earnings numbers to come in more than 20 percent higher than from the prior year. As metals investors await the impact of further quantitative easing reductions on Gold and Silver, equities investors wonder if the market momentum from 2013 will continue through 2014.

GOLD FEELS PRESSURE FROM POSITIVE U.S. ECONOMIC DATA

The Gold price was slightly affected Wednesday by better than expected U.S. manufacturing data. The U.S. Federal Reserve reported in its Beige Book that the economy continues to show growth with consumer spending on the rise. Investors expect that as economic factors fortify, the Fed may accelerate tapering measures. “Technically it’s still a buyer’s market, but the increased volatility in recent sessions is a sure signal something’s about to give,” Interactive Investor head of derivatives Mike McCudden said. “News that the World Bank has upgraded its global outlook while U.S. consumer spending surprised to the upside may have brought some calm to the VIX (Volatility Index) but the poor jobs data last week should serve as a reminder that the U.S. economic recovery is still patchy.”

GOLD STILL EVEN DUE TO LACK OF MOTIVATING FACTORS

Gold and Silver continue to trade even Thursday as a slightly weaker dollar did little to boost metals out of their current trading range. "Maybe gold has taken a little bit of direction there but there is still a bit of selling preventing a move higher," Mitsubishi analyst Jonathan Butler said. New economic data is needed to influence investors away from the sidelines. Speculation surrounding further tapering of the Federal Reserve’s quantitative easing program will likely motivate Precious Metals prices in the near future.

GOLD JUMPS FROM INVESTORS APPEAL

At the end of a rather slow week for the Precious Metals market, Gold realized modest gains as investors exit equity positions. Following data that reflected a contraction in the numbers of U.S. homes built in December, stock index futures fell as the market digested the lackluster housing numbers. “Until the air starts to come out of the in-my-opinion presently overly inflated stock-market balloon,” Gold will remain under pressure, one Precious Metals expert, said. On top of poor home constructions figures, analysts predict a general slow-down in industrial production from November to December.

At 3:44 p.m. (ET), the APMEX Precious Metals spot prices were:

  • Gold, $1,254.00, Up $11.30.
  • Silver, $20.32, Up $0.22.
  • Platinum, $1,453.80, Up $20.30.
  • Palladium, $747.40, Up $3.50.

For more APMEX reviews of daily and weekly Precious Metals market activities, visit our News and Commentaries page.

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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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