Weekly Gold & Silver Market Recap – 1/10/2014

FLASH CRASH SEES GOLD DROP $30

Precious Metals began the week by trading flat after a brief “flash crash” early Monday morning. A large trade of about 4,200 contracts were dumped just after 10 a.m. (ET), causing the Gold price to tumble by $30 per ounce before recovering almost immediately. Ross Norman, chief executive officer at Sharps Pixley, said that the trade “looks to be shorts defending their substantial positions.”

HOW WELL IS THE U.S. ECONOMY PERFORMING?

A study by two Harvard economists said that the American economy is doing reasonably well, but only when you consider what an economy would normally look like after a major financial crisis. Considering nine major financial crises in the country, and with certain adjustments, the average decline in gross domestic product is about nine percent, with a recovery time of nearly seven years. The crisis of 2009 showed a five percent drop with a six-year recovery.

GOLD STILL SHINES AS AN INSURANCE POLICY FOR INVESTORS

Gold continues to be a positive venture for investors as Ross Norman, chief executive officer at Sharps Pixley described the yellow metal as, “In fact, [it’s] the cheapest insurance in town against economic difficulties.” Jeffrey Wright, managing director at H.C. Wainwright LLC, expected the upcoming Federal Open Market Committee (FOMC) minutes and this week’s jobs report to pressure Gold. “I am anticipating the FOMC minutes to reveal a larger consensus for tapering of [quantitative easing] in 2014, and expect a further impact in the near term,” Wright said. “Employment numbers could be mixed; with seasonal holiday hiring in this report. So both data points should be negative for gold after release and could take us back towards $1,200.”

QUANTITATIVE EASING STILL CENTRAL INVESTOR FOCUS

Gold took its largest dip in a week on Tuesday as investors prepared for Wednesday’s release of the minutes from the Federal Reserve’s December policy meeting. “People want to know how serious the Fed is about easing, and tomorrow more details will come out,” TD Securities head of commodity strategy Bart Melek said. Anticipation that reduced stimulus measures will positively impact the dollar put pressure on Precious Metals prices. Following last week’s short-covering rally, Gold looked for a foundation as an improved economic outlook weighs heavily on the metal.

UPCOMING ECONOMIC NEWS PRESSURES U.S. STOCKS

U.S. stocks reversed a three-day losing streak after optimistic investors anticipated fourth quarter earnings reports and Friday’s Labor Department figures. “Everyone’s waiting on the Fed minutes tomorrow and the jobs report on Friday could be a driver of further confidence,” Wells Fargo Private Bank chief investment officer John Lynch said. Equities investors waited to see if ongoing positive date could propel stocks further as they continued to reach record levels.

PRECIOUS METALS, U.S. STOCKS DIP ON POSITIVE ECONOMIC DATA, FED MINUTES

Precious Metals fell slightly throughout the day Wednesday due to the private sector reporting a better than expected increase for jobs in December. Also, the minutes from the Federal Reserve’s December Federal Open Market Committee meeting were released this day. The minutes showed a consensus amongst participants who believe it was time to taper fiscal policy as the program’s benefits appear to have diminished over time. “Overall there is nothing in the minutes to change our view, based on Fed Chairman Ben Bernanke’s comments in the post-meeting press conference, that the Fed will continue to reduce its purchases at a pace of $10 billion at each meeting this year,” Capital Economics chief U.S. economist Paul Ashworth said.

The S&P 500 dropped following the release of the Fed minutes. The Fed’s bond buying program boosted the S&P 500 by nearly 30 percent in 2013, but with tapering in 2014, the market could see a reverse reaction. “The financial markets really didn't move at all, but typically history would suggest they need a little bit of time to just digest these things,” Darrell Cronk, regional chief investment officer of Wells Fargo Private Bank, said.

INVESTORS SHOW RESTRAINT AHEAD OF JOBS REPORT

The Gold price remained flat Friday morning as cautious investors awaited Friday’s non-farm payroll figures. Physical demand for Precious Metals continues to buoy Gold as upbeat economic data weighs on the yellow metal’s short-term prospects. “Demand for gold coins and bars was very strong last year on account of the falling prices, a trend which appears to be continuing at the start of the year,” Commerzbank AG, said. Preliminary estimations predict improvement in the jobs market. Analysts predict Gold and Silver will remain range-bound until the release of tomorrow’s employment numbers.

DISAPPOINTING JOBS REPORT BOOSTS GOLD, SILVER

Gold and Silver prices surged after the release of the monthly jobs report Friday, which showed that the economy added 74,000 jobs in December. Economists expected an increase of 193,000, so the number missed the mark by a large margin; however, the unemployment rate fell to 6.7 percent. That figure may be skewed by the number of people dropping out of the labor force altogether. Gold rose by 1 percent and Silver rose by nearly 2 percent on the news, while U.S. stock futures and the U.S. dollar turned sharply lower.

Gold investors look to the jobs report as a gauge of the health of the U.S. economy, specifically regarding the pace of the U.S. Federal Reserve’s tapering of quantitative easing. Natixis analyst Bernard Dahdah said, “It will take a few more months of good figures in terms of U.S. employment data to see the Fed accelerating the pace of tapering.” After the disappointing report, some investors will now wonder if that could be in jeopardy.

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

  • Gold, $1,248.20, Up $16.30.
  • Silver, $20.17, Up $0.44.
  • Platinum, $1,438.10, Up $16.20.
  • Palladium, $744.80, Up $8.30.

For more APMEX reviews of daily and weekly Precious Metals market activities, visit our News and Commentaries page.

APMEX’s Account Managers now have extended hours Mondays through Thursdays and are here to serve you until 8 p.m. (EDT)! Or call us Fridays until 6 p.m. (EDT)! If you have any questions about investing in Precious Metals or simply would prefer to place your order by telephone, we are here to help.

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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
4/20/2014 10:09:33 PM EST

Metal Bid Ask Change
Gold $1,284.10 $1,286.10 ($9.80)
Silver $19.23 $19.33 ($0.32)
Platinum $1,400.50 $1,410.50 ($18.20)
Palladium $789.00 $794.00 ($14.10)
4/20/2014 10:09:33 PM EST

Click here for Historical Charts*All Charts are in USD


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