Gold started the week looking to mount a lasting rally as the crisis surrounding Ukraine and conservative tapering of monetary stimulus measures lent momentum to Precious Metals. However, Tuesday saw a substantial selloff that forced Gold down as much as $35 per ounce. Strong domestic economic data and Gold trading above its 200-day moving average triggered the selloff as the yellow metal ended Tuesday 2 percent lower while Silver dipped below $20 an ounce. Some analysts are pointing to this week’s dip as a strong buying opportunity. With Gold and Silver trading below the psychological levels of $1,300 and $20 per ounce respectively, the perpetuation of low interest rates, geopolitical tension and the fear of a stock market correction could be the impetus to push Precious Metals prices higher in the coming weeks and months.
Gold futures were heading to their highest close in three weeks. A combination of investor skittishness about events unfolding in Ukraine and the sharp stock selloff last week kept Gold prices up. It is interesting to note that Gold and Silver remained positive despite a rebounding equity market. Palladium has been in the spotlight as of late. Concerns about Russian Palladium supplies are driving prices to their highest level in two years.
The stock market was up more than 100 points Monday, as U.S. retail sales rose 1.1 percent in March. This supports speculation that the economy is shaking off the effects of a cold winter. March results showed the strongest gains since September 2012. “The overall tone of this report was unambiguously constructive, underscoring that U.S. consumers are back in the game after the weather-induced slump in spending in earlier months,” Millan Mulraine, economist at TD Securities, said. It is significant to note that auto sales were up 3.1 percent in March. Platinum and Palladium prices are correlated to the health of the automobile industry.
According to Richard Ross, technical analyst at Auerbach Grayson, Tuesday’s selloff represents a buying opportunity, according to his technical charts. “There are some signs that make Gold very attractive at these levels," Ross said. "I'm not a Gold bug per se but I do like a nice chart and I think that's what we can see here with Gold. It has a lot of things in its favor." Ross foresees a weaker U.S. dollar, low interest rate policies and continued volatility in the stock markets, all of which support higher Gold prices. By Tuesday’s close, Gold moved up, recovering from morning lows.
Gold and Silver prices held firm throughout morning trading Wednesday despite U.S. stocks soaring. U.S. industrial production numbers came in better than expected, but the housing news disappointed. New home construction is on the rise, but not near its post-recession peak hit last November. This leaves housing as one significant sector that still poses a drag on the economy. "Given the weather, housing is still disappointing," Scott Brown, chief economist at Raymond James, said. Cold weather is not the only problem faced by the housing industry. There is a shortage of lots on which to build, a shortage of skilled labor and rising material costs.
As we head into the long weekend, Gold is still hovering below $1,300 an ounce. ANZ analysts believe that “safe-haven demand for Gold will likely become a feature again in the near term (on Ukraine). But the market remains fickle, and profits are likely to be taken off the table quickly.” U.S. investors will continue to digest domestic economic reports, geopolitical turmoil and Federal Reserve policy in the short-term to gain perspective on the upcoming trajectory of Precious Metals prices.
At 5 p.m. (ET), the APMEX Precious Metals spot prices were:
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- Gold, $1,297.70, Down $7.10.
- Silver, $19.69, Up $0.01.
- Platinum, $1,414.60, Down $23.20.
- Palladium, $797.10, Down $6.20.
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