Weekly Gold & Silver Market Recap – 2/21/2014
SOFT DOLLAR CONTINUES TO BUOY METALS
Gold began to claw its way upward Monday to its highest level in more than three months thanks to a weaker dollar. Gold began rallying toward the end of January as emerging market concerns caused fearful investors to seek asylum in Precious Metals. As equities rebound, a softer U.S. dollar seems the only traditional factor in motivating the Gold price. "The question is how much further it can run … it could be pushed towards the mid-$1,400 [per ounce],” Sean Corrigan, chief investment officer at Diapason Commodities Management, said. Gold has experienced several consecutive sessions of gains and investors will wait to see if the momentum can continue and reverse the bearish trend.
WEAK U.S. ECONOMIC DATA CONTINUES TO SUPPORT METAL PRICES
After investors received confirmation Monday that billionaire John Paulson had maintained his Gold holdings last quarter, hedge funds increased to a three-month high. A bullish market is returning after Gold fell 28 percent in 2013, which was the largest drop since 1981. Gold surpassed the anticipated $1,300 per ounce price last week and has remained at that supported level, while such stability has not been reflected in U.S. economic data. “The run-up in prices in recent weeks has been attached to the meltdown in emerging markets, and adding to that concern is U.S. economic news,” John Rutledge, chief investment strategist at Safanad investment company, said. “It’s still probably too soon to say the trend in Gold market has fully turned. You’ve got people who are bears because they see inflation as under control, and others looking further ahead seeing inflation.”
WEATHER MAY BE TO BLAME
Poor U.S. economic data continues to be blamed on recent severe weather conditions. “The weather doesn’t just clog traffic, it clogs the economic data,” Lawrence Creatura, portfolio manager at Federated Investors, said. “You just don’t know if this is indicative of what’s going on in the broader economy.” Investors awaited key reports this week, including home sales and manufacturing and house construction, along with the release of the U.S. Federal Reserve meeting minutes from January, which typically offers clues into what central bankers are thinking.
GOLD, STOCKS FLAT BEFORE FED MINUTES
The Gold price gained slightly during trading Tuesday, but remained mostly flat after a three-day rally when it reached a 3-1/2 month high. Minutes from January’s Federal Reserve’s policy meeting came out Wednesday and were highly anticipated by the market to see policymakers’ reaction to poor U.S. economic data. Macquarie analyst Matthew Turner said, “I suppose the interest around the [Federal Open Market Committee] minutes would be what they have to say about the slowdown in the U.S. economy, which could be providing some Gold direction in the short term.”
CHINESE GOLD OVERTAKES INDIA
Data released Tuesday in the World Gold Council’s full-year report for 2013 shows China officially overtook India as the world’s largest consumer of Gold. Although Gold’s price was affected in part due to large outflows of exchange traded funds (ETFs) in 2013, the demand for the physical metal surged. The report stated, “The main feature of Gold investment throughout 2013 was the contrast between ETFs, which acted as a source of supply to the market as sizable institutional positions were sold, and demand for bars and coins, which surged to an all-time high.”
GOLD’S WINNING STREAK ENDS
Gold fell Wednesday after rallying the previous nine days, marking its longest winning streak since July 2011. The Fed minutes provided the market with necessary information regarding officials’ beliefs on the U.S. economy regarding interest rates, the job market and inflation. Gold is currently “battling with the complexity of faltering U.S. economic data against the backdrop of a continued Federal Reserve taper,” CitrinGroup founder and executive chairman Jonathan Citrin said ahead of the Comex close. “So far this year, Gold has rallied as growth has fallen off the expected pace. However, at the end of the day, theory ties the metal’s price closely with that of the U.S. dollar. The ‘new’ Fed, [led] by Chairwoman [Janet] Yellen, appears reluctant to change course — more taper indicates a stronger dollar and less need for an inflation hedge such as Gold.”
PROFIT-TAKING WEIGHS DOWN GOLD PRICE
Gold fell slightly Thursday as the run up to a 3 ½ month high encouraged a round of profit-taking. Some of the profit-taking was triggered by reassuring comments included in the minutes from January’s Federal Reserve policy meeting. The minutes indicated an ongoing commitment to a steady reduction in quantitative easing (QE) measures. However, it appears that Precious Metals investors have thoroughly digested the anticipation of consistent QE trimming and the idea of less liberal monetary injections have been priced in to the market.
PRECIOUS METALS BOOSTED
Precious Metal prices rebounded Friday from previous day’s losses and traded higher throughout mid-day trading. Violence around the world has boosted Gold’s safe-haven appeal. That coupled with traders awaiting direction from upcoming speeches by Federal Reserve officials have been positive for metal prices. Gary Dugan, chief investment officer for Asia and the Middle East at Coutts, said Gold is “attractive as a hedge against exposure to emerging-market assets, acting as a stabilizer when emerging economies suffer wobbles. Recent events, for example in Turkey, show that these risks haven’t disappeared, and that problems in individual countries can trigger fresh demand for gold.”
U.S DOLLAR STRUGGLING
The U.S. dollar declined Friday after U.S. housing data showed a weaker than expected market. Scott Smith, senior corporate foreign exchange trader at Cambridge Mercantile Group in Calgary, stated, “The weak existing home sales data was a negative for the U.S. dollar and helped the euro.” Historically, as the U.S. dollar has declined, Precious Metals prices have risen.
At 3:41 p.m. (ET), the APMEX Precious Metals spot prices were:
- Gold, $1,326.40, Up $7.50.
- Silver, $21.88, Up $0.15.
- Platinum, $1,431.00, Up $16.50.
- Palladium, $741.00, Up $3.70.
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