Weekly Gold & Silver Market Recap – 10/3/2014

Peter LaTona

10/3/2014 4:17:00 PM

The correlation between the U.S. equity market and Gold was unusually high this week, as both markets suffered losses. U.S. stocks closed out strong Friday on the upbeat jobs report, but for the week geopolitical tensions and the IMF cutting the global economic growth outlook drove U.S. stocks down. The U.S. dollar is the big winner as it continues to show strength relative to other fiat currencies. The U.S. unemployment report is viewed as the best indicator of future Fed actions, so capital has moved away from inflationary expectations to stability expectations. Safe-haven money continues to flow to the U.S. dollar.

The U.S. dollar continues to be the big winner, which makes two articles published this week especially interesting. It is not news that the BRICS (especially China) do not prefer the U.S. dollar as the world reserve currency, but what can be done about it?  An “unusual suspect” contributed to this conversation, former Federal Reserve Chairman Alan Greensburg.  In his article, “Gold Is Universally Acceptable and Why China Is Buying,” Greensburg explains that if China converted a small portion of their $4 trillion foreign exchange reserves into Gold, the Chinese currency would take on unexpected strength. He also commented that if the U.S. dollar or other fiat currencies were universally acceptable, there would be no need for Gold, but the fact that central banks have been buying Gold since 2009 indicates this is not the case. In a separate article, China Gold Association President Song Xin said China is on its way to accumulating 8,500 tonnes of Gold, which would be the highest amount of any current central bank, including the U.S. Gold will help support the renminbi (Chinese currency) to becoming an international currency as “Gold forms the very material basis for modern fiat currencies,” Song stated.

The Hong Kong rioting has also been big news this week and despite threats from China violence has only continued to escalate. Until Thursday, violent protests were contained at the central protest site, but on Friday violence broke out in one of Hong Kong’s most famous shopping districts. Hundreds of Chinese rule supporters stormed tents and tore down banners of the pro-democracy protestors forcing many to retreat. As this confrontation spread, more protestors headed for the district of Mong Kok, which is considered to be the most crowded place on earth. This pro-democracy movement is the biggest challenge faced by Beijing since Tiananmen Square in 1989.

At 4:15 p.m. (ET), the APMEX Precious Metals spot prices were:

• Gold, $1,192.60 Down $24.00
• Silver, $16.92 Down $0.20
• Platinum, $1,228.70 Down $43.70
• Palladium, $756.00 Down $12.70

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