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Weekly Gold & Silver Market Recap – 7/25/2014

GOLD RISES DURING UNCERTAINTY; U.K. EXPECTED TO IMPOSE SANCTIONS ON RUSSIA

The Gold price continued to climb Monday as geopolitical tensions grew over the controversial Malaysia Airlines Flight 17 that was supposedly shot down by Ukrainian rebels. U.S. Secretary of State John Kerry confirmed Sunday there is strong evidence suggesting Russia provided the missile that Ukrainian rebels used to shoot down the jet. The safe haven appeal of Gold has been supported by concerns between Ukraine and the Middle East, which has sparked a 9.4 percent gain for the yellow metal this year. “Escalation of sanctions on Russia and more geopolitical problems in Gaza are keeping Gold supported,” George Gero, a vice president and Precious Metals strategist at RBC Capital Markets in New York, said in a telephone interview. “There are enough fundamentals to keep prices over $1,300 [per ounce] for some time.”

EMERGING MARKETS MAY BOLSTER GOLD PRICES

According to a recent research note from Bank of America/Merrill Lynch, the worst may be over for the Gold market. "After the sharp correction in 2013, Gold prices have stabilized this year. Looking at supply and demand dynamics, this was heavily influenced by reduced investor selling at the same time as physical offtake from emerging markets has been steady," BoA/ML analyst Michael Widmer said in the research paper. The price going forward will greatly be supported by buying in the emerging markets. "We believe that physical demand from emerging markets will gain further clout in the medium term as countries get more affluent, suggesting the worst may be behind the Gold market," Widmer said.

MIDDLE EAST DEMAND COULD BOOST LONG-TERM GOLD PRICE

The Gold price shifted slightly lower Tuesday as speculation regarding a near-term hike in interest rates weighed on the yellow metal. Though Gold was still trading above $1,300 an ounce, higher interest rate expectations sidelined some Precious Metals investors. However, geopolitical crises are still offering some support and the announcement of trade expansion for bullion in the Middle East could force prices even higher over the long term. A spot Gold contract has been extended into Dubai and is expected to boost the region’s demand for physical bullion delivery. “We believe the Middle East has a lot of potential to catch up with the rest of the world,” Frederic Panizzutti, chief executive officer of Dubai’s MKS Precious Metals DMCC, said.

METAL PRICES FLAT AS UKRAINE, ISRAEL DOMINATE HEADLINES

Precious Metal prices traded flat Wednesday. Although this was the second straight day Gold futures declined, continued turmoil in the Middle East and Ukraine provided support to metals. Blake Robben, a senior market strategist at Archer Financial Services in Chicago said, “There is definitely some temporary support because of geopolitical tensions, but the strength in the equity market continues to be a big headwind.”

DEMAND FOR SAFE-HAVEN AND “RISKY” ASSETS INCREASE

Equity markets around the world edged slightly higher Wednesday after data showed solid corporate earnings, increasing the demand for more “risky” assets. However, strong demand for safe-haven assets has continued as investors monitor geopolitical situations around the world. Rick Meckler, president of hedge fund LibertyView Capital Management in Jersey City, New Jersey said, “The bottom line is investors have moved away, for now, from the big political stories and are refocused on earnings, which in general have been good.”

GOLD DOWN AMID EIGHT-YEAR LOW JOBLESS CLAIMS

Strong data out of China and the eurozone pressured Gold below the $1,300 per ounce level in early-morning trading Thursday. Physical demand for Gold in China increased after the price fell though is still considered weak when compared to earlier this year. Natixis analyst Bernard Dahdah said, “The market is going to follow very closely any comments from the Federal Reserve about interest rates as that is likely to continue having an impact on Gold's trading pattern.”

U.S. JOB MARKET SHOWS RECOVERY

U.S. jobless claims fell to their lowest level in eight years, according to data released by the Labor Department Thursday. The figure of 284,000 is much lower than the expected 310,000, which pressured Precious Metals. The four-week moving average fell to its lowest level since May 2007. U.S. stock futures increased, pointing toward a higher open for Wall Street. The Dow Jones Industrial Average held above 17,000 and the S&P 500 index closed in on 2,000.

GOLD RECOVERS FROM FIVE-WEEK LOW

The Gold price recovered from a five-week low as it climbed closer to the psychological $1,300 per ounce level Friday. Commerzbank analysts cite the low demand in Asia as a main reason for Gold’s trouble breaking higher. They wrote, “The World Gold Council’s forecasts of Chinese Gold demand, which were issued at the beginning of the year and envisaged demand being on a similar scale in 2014 as it was in 2013, meanwhile appear ambitious. In our opinion, the weak Gold demand figures to come out of Asia – not only China – of late preclude any rise in Gold prices.”

At 4:35 p.m. (ET), the APMEX Precious Metals spot prices were:

  • Gold, $1,308.40, Up $16.60.
  • Silver, $20.76, Up $0.34.
  • Platinum, $1,482.80, Up $8.10.
  • Palladium, $881.80, Up $9.80.

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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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