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Weekly Gold & Silver Market Recap – 3/21/2014

GOLD HITS SIX MONTH HIGH

Gold hit a fresh six-month high Monday morning following a vote in Crimea to break from Ukraine. Western countries began warning Russia of sanctions after the vote, spurring geopolitical tensions that are generally positive for Gold. Societe Generale analyst Robin Bhar said, “It's definitely soft economic data, risk aversion, Ukraine and geopolitical tensions. Also there is more of a risk now of China maybe having a bit of a hard landing, U.S. recovery may be slower than people thought and Gold is coming in on its own as an insurance policy, safe-haven bid.”

STOCK MARKET BENEFITS FROM GEOPOLITICAL TENSION

U.S. stock futures pushed higher in premarket trading Monday morning, shrugging off the Crimea vote. Craig Erlam, market analyst at Alpari UK, said, “The vote itself went exactly as was expected, but Friday’s risk aversion wasn’t based on how the vote would go, it was down to the uncertainty around how the West would respond. As yet, there has been no response which is why we’re seeing that relief rally this morning.”

PUTIN COMMENTS, FOMC MEETING WEIGH ON GOLD

After reaching a six-month high Monday on concerns regarding the crisis in Ukraine, Gold fell slightly Tuesday on comments from Russian President Vladimir Putin that comforted the international community’s anxiety about further land acquisition in Ukraine and escalating tension in the region. As those fears have been temporarily quelled, Gold is giving back some of its gains. Overall, the yellow metal has rallied 13 percent this year, even as the Federal Reserve continues to reduce the scale of its ultra-loose monetary policy. The monthly Federal Open Market Committee (FOMC) meeting commenced Tuesday with expectations that the Fed would continue to taper its quantitative easing program, which only added to the downward pressure already weighing on Precious Metals prices.

METALS DROP AFTER FED STATEMENT

Precious Metals were under pressure Wednesday following U.S. Federal Reserve Chairwoman Janet Yellen’s statement that interest rates will remain low after the U.S. economy stabilizes. The Fed had previously announced interest rates would increase once the job market recovered to a rate of 6.5 percent and inflation rose to a targeted point, therefore the news threw the market into a frenzy. Over the past couple of weeks, geopolitical tension has played a major role in supporting Precious Metals prices, primarily Gold, and as tensions in Ukraine have slowly eased, prices have been affected. "Gold's appeal as an inflation hedge is not as strong after the Fed's moves. It was already down on the reduction in geopolitical risk, so the combination of the two is pretty powerful," said James Steel, chief Precious Metals analyst at HSBC.

POLICY MEETING REVEALS NEW DETAILS

Wednesday was Fed Chairwoman Janet Yellen’s first press conference in which she declared the federal funds rate would be different than previously forecast. Interest rates are now expected to increase to 2.25 percent by the end of 2016 instead of the formerly stated 1.75 percent. The first rate hike will occur within six months of the Fed’s bond-buying program ending, which does not currently have an official end date. The Fed recognizes the current condition of the U.S. economy and that it is not at the desired level of growth and stability. “They took out any numerical thresholds and are basically going to look at everything,” PNC Financial Services chief economist Stuart Hoffman said. “They are no longer going to draw any numerical lines in the sand.”

GOLD DOWN ON YELLEN COMMENTS

Gold and Silver dropped Thursday for the fourth straight session as the market continued to react to the Federal Reserve’s commitment to continued asset purchase reduction. With the ongoing tapering of monetary stimulus measures, Fed Chairwoman Janet Yellen also indicated a time frame of “around six months” before the Fed will begin raising interest rates. “Dealers and speculators were moving prices down on their gut feel for the impact on markets of [Yellen’s] statement,” Julian Phillips, founder of GoldForecaster.com, said. Phillips added the short-term movement of Gold, in regards to traditional supply-demand, will eventually force the price higher.

MARKET FOCUSES ON DISAPPOINTING JOBLESS CLAIMS REPORT

A rise in jobless claims Thursday wasn’t quite enough to bring relief to the Gold price, as it was less than expected. However, Yellen’s comments Wednesday suggested that job growth is improving. A large portion of blame on recent months’ disappointing data has been placed on the poor weather. Yellen pointed to the fact that nonfarm payrolls accelerated in February, and pointed to it as a good sign for hiring.

GOLD OUTPERFORMING EVERYTHING IN 2014

Precious Metals moved higher during Friday trading. After a rough 2013, “Gold is beating nearly every investment this year,” according to MarketWatch. Mike McGlone, head of research at ETF Securities, said, “The world’s primary asset measure, the S&P 500, reached all-time … highs in 2013. When the S&P 500 moved above the old high near 1,550 in March 2013, the Gold correction accelerated, [but] to the extent that the S&P 500 does not go up, or corrects, and/or underperforms expectations, Gold should remain a primary beneficiary.”

ANALYSTS HAVE MIXED VIEWS ON FUTURE OF GOLD

Economists Peter Schiff and Mark Dow disagree on the future of Gold. Dow believes that sentiment for Gold is mixed, which makes it difficult to predict where Gold will go next; however, Peter Schiff said, “I still think the sentiment is quite negative on Gold. Maybe not as negative as it was, but very few people believe in this rally … so I think the sentiment still favors higher Gold prices. The fundamentals have favored higher Gold prices all along. It's just that most people don't understand how great [the fundamentals] are. They believe the myth of the U.S. recovery. They believe the [U.S. Federal Reserve] can actually unwind its balance sheet, that it can end [quantitative easing], that it can raise interest rates and that the economy is going to keep on expanding. None of that is going to happen. It's all fantasy.”

At 5:07 p.m. (ET), the APMEX Precious Metals spot prices were:

  • Gold, $1,336.40, Up $3.90.
  • Silver, $20.35, Down $0.13.
  • Platinum, $1,438.60, Up $1.80.
  • Palladium, $795.00, Up $23.40.

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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