Weekly Gold & Silver Market Report for April 19, 2013

Nicholas Wilsey

4/20/2013 8:02:00 AM

BUYERS REACT TO LOWER METAL PRICES

This week Gold & Silver prices started in the same way it ended last week, moving lower. The price for Gold officially closed below $1,400 Monday, experiencing its largest one-day drop since February 1983. Prices for Silver, Platinum, and Palladium saw significant drops as well. Silver in particular ended at a two-year low in afternoon trading, pushed down by fears that China’s disappointing economic growth in the first quarter of 2013 will negatively impact demand for industrial metals. Despite the sell-offs seen Friday and today, David Morgan of the Morgan Report investment newsletter is of the opinion that “investors would be wise to hold their positions and wait it out.” Morgan cites the continuing financial crisis in Cyprus, tensions over North Korea, and the fact that “the silver retail market is showing high premiums with shipping delays” as reasons why the fundamentals for Gold and Silver are “still strong.” After two days of losses for the price of Gold, Tuesday’s market turned in a positive direction. “We have had technical barriers broken in the past two days, while the overall macro environment has been moving away from the inflation bias ... and some institutional investors are rethinking their positions in commodities in general and Gold specifically,” Deutsche Bank analyst Daniel Brebner said. The drop in price has caught many investors off guard due to the uncertainty throughout the global economy. With the sudden drop in price, many Gold and Silver buyers are taking advantage of the chance to get into the market. Sales of Gold American Eagle coins have risen more than 65% since last Friday. The U.S. Mint has sold more than 83,000 ounces of Gold Eagles in the first three weeks of the month, compared to just 20,000 in April 2012. "It's been nearly two years since people have been getting such low prices, so those waiting for more favorable buying conditions are now coming forward," said one analyst.

ECONOMIC OUTLOOK SHOWS UNCERTAINTY

Tuesday morning, New York Federal Reserve President William Dudley confirmed he expects the U.S. economy to remain sluggish, estimating 2 to 2.5 percent growth this year and a modest decline in unemployment. Only 88,000 new jobs were created in March as Americans gave up hope for pursuing employment. "While I don't want to read too much into a single month's data, this underscores the need to wait and see how the economy develops before declaring victory prematurely," Dudley said. As disappointing data from around the globe modestly boosted Precious Metals prices Thursday, stocks experienced minor losses. “You can tell equity investors are on edge and looking for a reason, almost any reason, to take a little money off the table,” Wells Fargo Advisors Senior Equity Strategist Scott Wren wrote. “A series of worse than expected economic reports out of China, Europe and the U.S. over the last handful of trading days has taken some of the enthusiasm out of the market.” Equities have been extremely volatile this week with major swings in successive sessions. Many experts are wondering if this year’s tremendous rally along with this week’s instability will influence investors to move out of stocks for the time being. The U.S. economy has yet to see the positive effects from the budget cuts of the sequester, which cut government spending and increased taxes. Analysts believe the sequester is to blame for the depressed unemployment rates seen recently, as many Americans were laid off during the beginning of the program. Stephen Stanley, chief economist at Pierpont Securities, commented on the Labor Department’s revised number of unemployment applicants for last week by saying, “We had a lot of volatility since the end of the quarter. This is a fairly clean, stable number. There is some slight strengthening in labor conditions, but nothing dramatic.”

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