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Weekly Gold & Silver Market Recap – 6/6/2014

Precious Metals prices fluctuated very little following last week’s significant drop that saw Gold fall below $1,250 per ounce and Silver dip under $19 per ounce.  Thursday was the only trading day that saw noteworthy movement as the European Central Bank (ECB) announced a plan for negative deposit rates and an asset purchase program, which helped boost Gold and push stocks to new record highs.  Sluggish trading volume and volatility were compounded by heightened risk tolerance and the arrival of Friday’s monthly non-farm payroll figures.  The numbers came in as expected and unemployment remains at 6.3 percent.  Investors continue to eye domestic economic developments, eurozone fiscal policy and geopolitical turmoil abroad to gain insight into the short-term future of Precious Metals. 

The Gold price rose for the first time in over a week Thursday as ECB President Mario Draghi announced deposit rates will be cut to minus 0.1 percent in an effort to combat deflation.  “The market is trained to react every time a major central bank makes a big announcement just as the Pavlovian theory states,” Michael Gayed, chief investment strategist at Pension Partners LLC, said. “[Thursday’s] move may be temporary as the market remains lackluster and is caught in a range, waiting for a catalyst that could be instrumental in the breakout.”  Gold and Silver investors hope Thursday’s mild bump will be the first step in a prolonged rebound.  As individuals awaited the release of non-farm payroll data Friday, combined with the historically sluggish summer trading cycle, it is little surprise bullion’s 60-day trading volatility is at its lowest in more than a year. 

U.S. stocks surged to new record levels Thursday as the ECB announcement boosted optimism regarding the global economy.  “Mario Draghi is taking a sledgehammer to the disinflationary environment in the eurozone,” Chad Morganlander, a fund manager at Stifel Nicolaus & Co., said. “His actions are well beyond expectations.”  The eurozone will also undertake its own asset purchase program in an effort to extend liquidity to struggling sectors of the region’s economy.

Gold is up more than four percent in 2014, but as the U.S. stock market continues to rise at its current rapid pace, the Gold-to-S&P 500 ratio has fallen to its lowest level since January 2008. The research team at ETF Securities points out this current phenomenon and asks if Gold is a cheap insurance option right now. In order for this ratio to revert to historical averages, either stocks have to come down, Gold must go up, or both. In either scenario, Gold will serve as an insurance policy. The firm also points out that volatility in the stock market has been very low and cannot remain low indefinitely.

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

  • Gold, $1,255.20, Down $0.10.
  • Silver, $19.07, Down $0.08.
  • Platinum, $1,455.20, Up $9.10.
  • Palladium, $846.40, Up $7.00.

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APMEX 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. 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 Market Reports are not intended as a comprehensive discussion and there may be other factors affecting the financial marketplace. These Market Reports are provided for informational purposes only and do not constitute a recommendation by APMEX to hold, purchase or sell any Precious Metal product. All orders, purchases and sales, if any, are subject to the terms of the User Agreement and other applicable policies.

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