Weekly Gold & Silver Market Recap – 1/3/2014
METALS REACT TO ECONOMIC DATA
Precious Metals traded lower Monday based on positive U.S. economic data as 2013 came to an end. Both Gold and Silver have had a difficult time finding much needed price support with the evolving economy and the Federal Reserve’s announcement of its plan to taper fiscal policy. According to the National Association of Realtors, pending sales of new homes increased in November for the first time in six months, which assisted in lowering Precious Metals prices for the day.
JOB MARKET EXPECTS RECOVERY IN 2014
Good news is ahead for unemployed Americans looking for a stronger job market with higher quality roles. "If we could maintain a 3 percent–plus pace next year … I'm thinking so far we have in the second half of this year … then yes, jobs prospects for everyone should improve," Joseph LaVorgna, managing director and chief U.S. economist at Deutsche Bank Securities, said. After November’s jobs report, a total of 2.1 million jobs were added in 2013, though the majority was in relatively low-wage sectors. "If we do see stronger manufacturing conditions, if we do see a stronger housing market, exports, that suggests … we see the types of jobs shifting from these low-paid part-time jobs that characterized the economy for the past couple of years into the better-quality, full-time jobs," Sophia Koropeckyj, managing director for Moody’s Analytics, said.
DIFFERING OPINIONS ON GOLD’S 2014
The Gold price ended the fiscal year of 2013 lower for the first time in over a decade after the biggest drop since 1981. Economists have many differing opinions on Gold’s immediate future. Some believe the price will fall further, while others, like Jeff Sica of Sica Wealth Management, think otherwise. Sica said, “While there are no immediate worries about inflation, it can’t be ruled out in the future with economic growth accelerating in some parts of the world. Gold will find support at lower prices with interest rates hovering near zero.” Precious metals were flat Tuesday on the last day of the year with little news to affect prices.
POTENTIAL AFTERMATH FROM FED TAPERING
MarketWatch’s Andy Xie wrote on some of the unintended consequences that the Federal Reserve’s unwinding of monetary easing could have on the U.S. economy. He wrote, “The risk at home for the Fed is much higher than during the previous tightening cycles. The U.S. economy is still quite fragile. The improving labor market is due to declining wages for the re-employed. Hence, its contribution to demand is limited. The stock market could be 50% overvalued. The Internet sector is a vast bubble similar to what happened in early 2000. If the bubble pops, it may lead to reduction in corporate capex, which could pull the economy back into recession.”
PRECIOUS METALS START THE NEW YEAR STRONG
As trading ended Thursday, prices were up for all four Precious Metals, with Gold experiencing an increase above $20 and Platinum seeing an increase of more than $28. Reports of bargain hunting by physical buyers (particularly those in China) helped drive prices higher. Naeem Aslam, chief market analyst with AvaTrade, said, “Physical demand for Gold is unquestionably supporting Gold which had experienced heavy losses last year."
STOCK MARKET PERFORMS POORLY FIRST DAY OF THE YEAR
In contrast to Precious Metals, stocks in the U.S. took a sharp drop during trading, resulting in the first negative start to a year for Wall Street since 2008. The S&P 500 fell over 16 points, the Dow lost over 135 points, and the Nasdaq dropped over 33 points. According to Key Private Bank’s chief investment strategist Bruce McCain, “I think the big issue is just how long investor enthusiasm lasts. It has certainly raced ahead of the fundamentals. The trend in the data really isn't the problem, they suggest we're getting some improvement in the fundamentals. But the markets have been superlative, and you can only keep that up for so long.”
GOLD LOOKS TO CONTINUE MOMENTUM IN 2014
Gold rose slightly on Friday following Thursday’s strong rally. Lower equities, physical demand from China, and bargain hunting are the central motivators of the metal’s price hike. “Gold opened near the lower range, so that’s why you see a bit of confidence in buy," Bernard Sin from MKS SA said. “I think we will probably see continued buying until next week…and thereafter it depends pretty much on U.S. figures and what the Federal Reserve is going to do.” Gold has remained in a relatively tight trading range since last month’s decline following the announcement of an initial Fed stimulus taper. "Positive bullion prices in reaction to the decline in equities may set the tone for 2014 and reinforce the negative correlation between the two," HSBC analysts said.
At 4:18 p.m. (ET), the APMEX Precious Metals spot prices were:
- Gold, $1,238.90, Up $11.20.
- Silver, $20.20, Up $0.02.
- Platinum, $1,414.60, Up $8.00.
- Palladium, $727.60, Down $2.60.
For more APMEX reviews of daily and weekly Precious Metals market activities, visit our News and Commentaries page.
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