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Weekly Gold & Silver Market Recap – 7/18/2014

GOLD TUMBLES FOLLOWING WIDESPREAD SELLOFF

The beginning of the week began with the Gold price experiencing it’s largest single-session decline of the year as Portuguese banking worries subsided and a rally among stocks influenced a round of profit-taking for Gold and Silver. “A strong stock market and some stability in the EU [are pressuring gold,]” Peter Thomas, a senior vice president at Zaner Group LLC in Chicago, said. Monday’s drop was not cause for concern among many investors as hedge funds continued to increase their positions and holdings for exchange-traded products. Traders and investors will continue to monitor Federal Reserve monetary policy along with macroeconomic news and geopolitical developments abroad for signs of market movement in the coming weeks and months.

YELLEN’S COMMENTS WEIGH ON GOLD

The Gold price fell back to $1,300 for the first time in roughly one month on Tuesday following testimony by Federal Reserve Chairwoman Janet Yellen in front of the Senate Banking Committee. "Yellen was a little bit more hawkish than expected. That signals higher rates sooner rather than later. And that's anti-inflationary, and presents competition for Gold,” Gold expert George Gero of RBC Capital Markets, said. Volatility continued Tuesday as the yellow metal hovered near the $1,300 mark. Monday’s significant price drop influenced a strong influx of new positions among Gold ETFs. The inflow of new contracts has raised trading volume to its highest level in nearly three years.

WGC RELEASES 2014 ASSESSMENT OF GOLD

As investors look to the second half of 2014, the Gold price is currently up over 9 percent this year. The World Gold Council (WGC) has released its 2014 review of Gold and has surmised that general interest in Gold is gaining momentum. According to the WGC, following the tremendous price drop in 2013, the current market climate appears bullish for Gold. Citing low prices, high bond issuance, tight credit spreads and record low volatility (prior to recent weeks) the WGC believes Gold is primed for higher prices through the second half of 2014. With ongoing speculation regarding a stock market correction and revamped turmoil in the Middle East, there could be plenty of impetus for a bullish run among Precious Metals before the end of the year.

GOLD TREADING WATER AS INVESTORS AWAIT YELLEN

Gold futures were trading even Wednesday as the yellow metal awaited new upward momentum following three days of losses. Prices dropped over $40 through Monday and Tuesday following a large technical selloff and dovish comments by Federal Reserve Chairwoman Janet Yellen regarding the future of interest rates in the United States. So far this year, Gold has been buoyed by geopolitical tension and low interest speculation. “The new speculative longs in the market may be justified based on (largely unpredictable) political tension in e.g. the Middle East and Eastern Europe,” Walter de Wet, commodities strategist at Standard Bank, said.

METALS RECOVERY CONTINUES; PALLADIUM AT 13 1/2 YEAR HIGH

Precious Metals were on the rise Thursday beginning the day on a positive note, following the recovery that started Wednesday. Fresh sanctions on Russia by the U.S. weighed stocks down, making way for higher Gold and Silver prices. The Palladium price hit a 13 1/2 year high on the sanctions. Mitsubishi analyst Jonathan Butler explained, “I am forecasting a 1.8 million-ounce palladium deficit this year due to the perfect storm of South African supplies falling to a near-20-year low, growing auto catalyst demand and of course the heavy inflows into the two South African ETFs.”

IS ANOTHER U.S. STOCK BUBBLE NEAR?

Andrew Smithers, chairman of Smithers & Co., was one of the only analysts to warn of the late 1990s stock bubble, and he believes we are now seeing the third largest stock bubble in U.S. history. Smithers used a collection of data to come to that conclusion, but also believes that stocks will likely go even higher before the bubble bursts.

MALAYSIA AIRLINES JET CRASH URGES INVESTORS TOWARD SAFE-HAVEN ASSETS

Gold bounced back Friday after news broke that a Malaysia Airlines jet carrying 295 passengers crashed in eastern Ukraine. Investors quickly began to sell stocks and move into safe-haven assets such as U.S. Treasury’s and Gold sparking both to jump immediately. There is still concern that the plane was possibly shot down. At this time, Ukrainian officials have confirmed that neither the government nor pro-Russian separatists fighting in the area were responsible for the incident. “The worst-case scenario from a market perspective would be one in which it was found Russian officials ordered the plane shot down while the most benign scenario would be one in which the crash was the result of mechanical failure, pilot error or some other cause unrelated to the long-running conflict on the ground,” John Canally, investment strategist at LPL Financial in Boston, said.

GOLD, SILVER DROP AS GEOPOLITICAL TENSIONS BECOME OLD NEWS

Speculations that the Federal Reserve plans to raise interest rates sooner than expected trumped Thursday’s geopolitical fears, causing Gold and Silver prices to fall. On Thursday, Gold jumped sharply on news about the Malaysia Airlines plane crash and Israel sending forces into the Gaza strip. Investors appear to not be as worried now. “There’s a little bit of concern that the Fed starts tightening,” Rob Kurzatkowski, a senior commodity analyst at optionsXpress, a Chicago-based brokerage unit of Charles Schwab Corp., said in a telephone interview. “Some of the fears that we’ve seen yesterday have dissipated.”

At 4:53 p.m. (ET), the APMEX Precious Metals spot prices were:

  • Gold, $1,312.40, Down $5.50
  • Silver, $20.93, Down $0.20.
  • Platinum, $1,492.30, Down $12.40.
  • Palladium, $882.40, Down $3.80.

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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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