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Weekly Gold & Silver Market Recap – 2/28/2014

PRECIOUS METALS RISE WITH SAFE HAVEN APPEAL

Precious Metals opened the week with strong gains from investors’ concern over poor U.S. economic data along with Ukrainian financial woes as the nation expressed it requires $35 billion to avoid monetary default on its debt. “There is some safe-haven buying because of continued signs of slowing growth in the U.S,” R.J. O’Brien & Associates senior commodity broker Tom Power said in a telephone interview. “Concerns about Ukraine remain.” Gold has rebounded 11 percent so far in 2014 even as the Federal Reserve continues to taper its fiscal policy, which shows the economy is improving and the dollar is strengthening. Gold has been and likely always will be seen as a safe haven asset against the unknown.

ECONOMISTS LOOK FOR CAUSE OF POOR DATA

As the U.S. economy continues to report weaker than expected news, the blame remains on severe weather seen nationwide, but that may not be accurate. "The mantra of late when it comes to assessing the high frequency economic data has been to blame it on the weather," Tom Porcelli, chief U.S. economist at RBC Capital Markets, said in a report. "But it seems to us that folks are all too eager to dismiss what could potentially be some real underlying weakness." Porcelli went on to note that some activity measures would relate to weather, however nonfarm payrolls, retail sales and housing sales would not necessarily be affected by this as they have reflected poor numbers overall.

GOLD UP SLIGHTLY

The Gold price remained in positive territory Tuesday as wavering economic news pushed the yellow metal to its highest level in 17 weeks. “People are concerned about U.S. economic growth, and that’s why many people have turned bullish,” Archer Financial Services senior market strategist Adam Klopfenstein said. “Gold is also finding some support from the ongoing political turmoil” in Ukraine, he added. Weak U.S. consumer confidence along with a strong possibility of credit default in Ukraine helped buoy Precious Metals for the day. Ongoing uncertainty regarding domestic and global economic health has lifted Gold 11 percent since the beginning of the year.

STOCKS FAIL TO REACH RECORD HIGH

The S&P 500 was unable to break its record high Tuesday for a second straight day after consumer confidence faltered and home prices dipped. “We’re kind of teetering with the new all-time high,” Ryan Detrick, senior technical strategist at Schaeffer’s Investment Research, said. “People are taking a step here and watching to see if we can get there again.” As markets continued to perform well through February, U.S. investors look to macroeconomic data both home and abroad for signs about the future of equities markets.

FEW COUNTRIES ADDING TO GOLD HOLDINGS

24/7 Wall Street’s Jon C. Ogg wrote that, though just seven nations are adding to their Gold holdings, they account for more than 79 percent of the world’s Gold supply. Citing the World Gold Council’s research, the article showed that Russia, Turkey, Venezuela, the Philippines, Kazakhstan, South Korea and Indonesia have been aggressive buyers of the yellow metal, which may come as a surprise to many. The World Gold Council’s report stated that there “remains little appetite from signatories to reduce their Gold holdings any further.”

GOLD DOWN FOLLOWING MULTI-SESSION RALLY

A stronger U.S. dollar pulled Gold from its highest level in more than four months Wednesday as expectations for ongoing monetary stimulus cuts propped up the greenback versus competing world currencies. Gold’s safe haven appeal has recently benefited from stock market volatility and civil unrest abroad and the yellow metal is set to rack up two straight months of gains for the first time since August. As questions about the strength of U.S. economic recovery and fear of stock market correction loom, investors will wait to see if Gold can continue a northward trend following the day’s setback.

FED PRESIDENTS VERSUS CONGRESS ON FIXING U.S. ECONOMY

U.S. economic data remains a key factor for future market movement and whether or not the Federal Reserve will continue with its tapering measures. The Fed has already cut back its monthly bond buying program by $20 billion a month with anticipation of more to come at next month’s policy meeting. Comments by various Fed presidents show that they’re not completely confident in how Congress has progressed with stabilizing the nation’s job and housing market. "If the fiscal and regulatory authorities that you elect and put into office to craft taxes, spending and regulations do not focus their efforts on providing incentives for businesses to expand job-creating capital investment rather than bicker with each other for partisan purposes, our economy will continue to fall short and the middle-income worker will continue being victimized, no matter how much money the Fed prints," Dallas Fed President Richard Fisher said in remarks before the Dallas and Fort Worth chapters of Financial Executives International.

METALS CONTINUE TO REBOUND AFTER YELLEN COMMENTS

Precious Metals continued their rise through afternoon trading Thursday. With foreign political tensions dominating headlines and recent data pointing to a weaker than expected U.S. economy, many investors are turning to Gold for portfolio support. FuturePath Trading LLC trader Frank Lesh said in a telephone interview, “There is some safe-haven buying. The [U.S. Federal Reserve] clearly seems concerned about the economic conditions.” Speaking on recent global political tensions, HSBC Securities Inc. analyst James Steel said in a note, “Heightened geopolitical risks as tensions in the Ukraine mount are supportive of Gold. Should events in Ukraine deteriorate and involve neighboring countries, Gold could benefit from increased safe-haven demand.”

PRECIOUS METALS TRADING LOWER AS INVESTORS WAIT FOR DIRECTION

Precious Metals traded slightly lower Friday from this morning’s open. A rise in U.S. equities along with data from the Chicago business barometer showing an increase in consumer sentiment has provided pressure to the metals. As tensions continue to rise in Ukraine, Gold’s safe haven appeal could get a big boost. Analysts at Sharps Pixley stated in a note, “after a group of gunmen have seized the local government buildings and later the airport in Crimea in Southern Ukraine and the Russians are getting ready for war games near the border of Ukraine, safe havens such as Treasur[ys], Gold, [the] yen as well as Swiss Franc have all been rising.”

U.S. DOLLAR LOSES SUPPORT

The U.S. dollar fell to a two-month low Friday as data showing that eurozone inflation unexpectedly held steady through February. Vassili Serebriakov, currency strategist at BNP Paribas in New York, said, “Expectations for [European Central Bank monetary] easing subsided after the CPI (consumer price inflation) numbers.” This could potentially provide support to Gold based on its historically inverse relationship with the dollar.

At 5:15 p.m. (ET), the APMEX Precious Metals spot prices were:

  • Gold, $1,330.60, Down $3.20.
  • Silver, $21.29, Down $0.09.
  • Platinum, $1,449.00, Down $6.40.
  • Palladium, $744.00, Up $0.20.

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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