Weekly Gold & Silver Market Recap – 10/25/2013

GOLD AWAITS FED’S NEXT MOVE

Gold remained flat during Monday trading as investors were still unsure of the Federal Reserve’s next move regarding fiscal policy. The yellow metal jumped nearly four percent the previous week under assumptions that the Fed will not taper its $85 billion monthly bond-buying program especially after the recent government shutdown, which has hurt economic growth expectations. “At some point the Fed will have to start tapering, there is also a consensus view that over three, four, five years bond yields will most likely be higher, and right now inflation rates are very low and show no sign of picking up,” Credit Suisse analyst Tobias Merath said. “These are the factors you will look at, if you ask yourself whether there is a need to buy Gold right now.” The Fed has already announced they will not cut back monetary policy unless the job and housing markets show improvement; both have been fragile since 2008.

HOUSING MARKET RECOVERY LOSING GROUND

The housing market is showing some weaker than expected data as the National Association of Realtors reported Monday that U.S. home resale’s fell 1.9 percent for the month of September. The drop is thought to be caused by higher mortgage rates along with consumers in the market place whose salaries are barely rising. Investors believe recent higher borrowing costs are slowing the housing market recovery.

DELAYED JOBS REPORT BOOSTS GOLD, SILVER PRICES

The U.S. Labor Department’s jobs report, originally due October 4, was released Tuesday morning. Economists expected an increase of 185,000 jobs in September, and the report showed a gain of 148,000, well less than expected. The unemployment rate fell slightly to 7.2 percent, which boosted stock futures in premarket trading, but the overall report was enough to push Gold and Silver prices up more than one percent.

Lately, the Gold price seems to be directly tied to the possibility of quantitative easing tapering. U.S. Federal Reserve officials have said recently that stronger economic data is needed before tapering will be announced, so the disappointing jobs report affecting the Gold price in a positive way was no surprise. While noting that the possible government shutdown could have affected hiring in September, Macquarie analyst Matthew Turner said, “On the other hand, employment is the key variable for the Fed tapering. In terms of Gold market reaction, as long as they haven't done it, there is always that suspicion that they can't do because the economy is not that strong, which could support prices.”

GOLD DOWN SLIGHTLY AFTER REACHING FIVE-WEEK HIGH

Following a rally that pushed Gold to a five-week high on Tuesday, profit-taking forced the yellow metal lower Wednesday. During a year that has seen Gold enter short-term bearish territory, some analysts have a positive outlook going forward as the metal is set to realize its first year of losses in more than a decade. Adam Koos, president of Libertas Wealth Management Group likes Gold’s prospects if it can stay above the critical technical level of $1,250 an ounce. He added that Gold’s “longer-term intermediate bearish trend was just broken and we’re looking at a positive trend for the first time this year.” With the nomination of Janet Yellen to Federal Reserve Bank chairman, investors and analysts will await indication of her agenda regarding the future of quantitative easing (QE). Most analysts are predicting the announcement of a QE to be delayed until at least mid-2014. Historically, the ultra-loose monetary policy has been a strong catalyst for higher Precious Metal prices.

WHEN WILL QUANTITATIVE EASING BE TAPERED?

In September, the Fed announced their decision not to cut back its infamous $85 billion monthly bond buying program due to the current U.S. economic condition. “If you look at where we are economically, versus where we were a year ago, we’re virtually in the exact same place,” Goldman Sachs Group Inc. President Gary Cohn said. “So if quantitative easing made sense a year ago, it probably still makes sense today.” The question many investors have is when the Fed will decide to taper fiscal policy as it will have to eventually happen with a growing balance sheet. “They’re in a position where they know they can’t quantitatively ease forever, they know they’re building a bigger and bigger balance sheet, but their No. 1 objective is to try and grow the U.S. economy,” Cohn said. “I do believe eventually they will taper. Eventually can be a very long time.”

SOFT DOLLAR, QE SPECULATION LIFT PRECIOUS METALS

Gold traded higher Thursday as a weaker U.S. dollar helped lift Precious Metals prices. “A still weak U.S. dollar – the U.S. currency has weakened against the euro to exceed the $1.38 mark for the first time in almost two years – is one major reason why the Gold price has been able to gain to around $1,340 per troy ounce this morning,” analysts at Commerzbank AG said. The perpetuation of quantitative easing measures by the U.S. Federal Reserve is also helping boost the Gold price as the recent government shutdown and disappointing employment numbers lend credence to Fed officials wanting to delay a possible stimulus taper. “The stimulus story is lending support to Gold,” Frank Lesh, a trader at FuturePath Trading, said. “Worries about the health of the U.S. economy are pushing some to Gold.”

GOLD RALLIES BACK TO EVEN ON WEAK CONSUMER SENTIMENT

The Gold price rose back to even levels Friday following early losses as weak consumer sentiment data increased the appeal of Precious Metals, setting Gold up to realize a week of gains. “Bad news is a good news for Gold,” Naeem Aslam, chief market analyst at AvaTrade, said. “Core durable good and consumer sentiment have further firmed the optimism” for continued quantitative easing. “We have to keep in mind that we still need to factor in the cost of a government shutdown for November’s data, which does not seem good either,” he said. Technical traders of Gold are now looking for the yellow metal to break through the next resistance level of $1,380 before it can break out of its current range and signal the potential start of a bullish move in the short to medium term.

At 4:30 p.m. (ET), the APMEX Precious Metals spot prices were:

  • Gold, $1,353.90, Up $1.60.
  • Silver, $22.60, Down $0.27.
  • Platinum, $1,455.70, Down $1.50.
  • Palladium, $743.70, Down $5.10.

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Disclaimer:

APMEX’s ‘News and Commentaries’ 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.

US Dollar Prices are in USD

Precious Metal Prices
4/17/2014 5:15:48 PM EST

Metal Bid Ask Change
Gold $1,294.60 $1,296.60 ($8.90)
Silver $19.60 $19.70 $0.02
Platinum $1,405.70 $1,415.70 ($22.10)
Palladium $792.10 $797.10 ($6.20)
4/17/2014 5:15:48 PM EST

Click here for Historical Charts*All Charts are in USD


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