Weekly Gold & Silver Market Recap – 10/31/2014

Brandi Brundidge

10/31/2014 4:27:39 PM

METALS AWAIT DIRECTION AHEAD OF FED MEETING

The week began with speculation on what might occur during the Federal Reserve’s two-day policy meeting that began on Tuesday, along with a week of important economic data releases. Precious Metal prices received a nice boost Monday morning ending three consecutive days of losses from recovering physical demand. Precious metals strategist at Mitsubishi Corp International Johnathan Butler said, “Although this is clearly a bearish development for gold as it implies the beginning of monetary policy normalization, it may have already been priced in.”

EURO BEGINS TO IMPROVE

The euro gained ground and edged up on Monday following the European Central Bank’s stress test on European banks.  The test helped relieve some concern surrounding the eurozone economy and found smaller than expected capital requirements within European banks. Neil Mellor, a currency strategist at Bank of New York Mellon in London, said, “There are some positives from the stress tests and it could have been a whole lot worse.”

GOLD DROPS AS ETP ASSETS DECLINE TO FIVE-YEAR LOW

Holdings in exchange traded products (ETP) backed by Gold fell to their lowest level in five years on Monday. The metal’s 30-day historical volatility climbed in October, shaking many investors out of the market. Investors continue to try and predict when the U.S. Federal Reserve will raise interest rates, which is considered negative for metal prices.

GOLD LIFTED BY WEAK DOLLAR

Precious Metals reacted positive on Tuesday to data from the U.S. Commerce Department showing durable goods orders fell 1.3 percent in September. The news pressured the U.S. dollar, which assisted Gold as it regained nearly four percent this month on global growth concerns. “There were some stops triggered once we breached yesterday's low, but China walked in and pushed up Gold,” one Hong Kong trader said. “People are nervous ahead of the FOMC and big position changes are unlikely. For the moment, I think we will hold between $1,220 and $1,240 [per ounce].”

HOUSING MARKET FUTURE UNKNOWN

U.S. housing data released on Tuesday showed an overall increase for single family home prices for the month of August from 2013, though the increase fell short of expectations. The S&P/Case Shiller composite index compared 20 metropolitan areas and reported a 5.6 percent gain for the month of August, the lowest year-to-year growth since November 2012. “Despite the weaker year-over-year numbers, home prices are still showing an overall increase, as the National Index increased for its eighth consecutive month,” S&P Dow Jones Indices index committee chairman David Blitzer said in a statement. The housing market will be a focus point once the Fed ends its stimulus program, as the policy initially began after the devastation from the notorious 2008 U.S. housing bubble.

FEDERAL RESERVE ENDS QE, PRESSURES COMMODITIES

Wednesday afternoon the market reacted to the Federal Reserve’s announcement to end its quantitative easing (QE) program, which consisted of monthly bond buying to stimulate the U.S. economy. Stocks fell, bonds sold off and Precious Metals were pressured lower after the news broke from the Fed’s policy meeting. Gold fell slightly more than one percent once the news broke. Investors also noticed a more aggressive tone toward raising interest rates sooner than later. “Maybe we brought forward the (first rate) hike a month or two from where it was yesterday,” David Ader, chief Treasury strategist at CRT Capital, said. Wall Street expected a fourth quarter rate hike, despite Fed forecasts of a hike occurring near mid-year.

METALS CONTINUE FALL ON FED’S DOVISH STANCE

Precious Metal prices were moving rapidly and trading lower on Thursday after Wednesday’s announcement from the U.S. Federal Reserve to officially end the stimulus program that has provided support to the economy.  However, even with the losses that occurred, some analyst are positive for the direction of Gold and believe the recent selloff in Gold prices is overdone and demand for the metal has already rebounded. 

U.S. DOLLAR CONTINUES TO CLIMB

A day after the Federal Reserve’s recent statement, the U.S. dollar climbed to its highest point in more than three weeks.  Although investors continued to take in the dovish tone from the Federal Reserve, upcoming data may also play a factor is Gold’s pricing.  Esther Reichelt, currency strategist at Commerzbank said, “The positive sentiment is likely to be reinforced by today's third-quarter gross domestic product data.”

BANK OF JAPAN’ S NEW ROUND OF QE WEIGHS ON PM PRICES

Friday morning both Gold and Silver fell to their lowest point since 2010.  The cause was mainly due to an unexpected move by the Bank of Japan to begin a new round of quantitative easing, which weakened the Yen to a near seven-year low.  The news boosted the U.S. dollar to a four-week high against other major currencies.  Precious Metals are attempting to fight off the many factors that are currently pressuring their price this week with the Fed ending QE in addition to Thursday’s strong U.S. gross domestic product data that was released.

At 5:24 p.m. (ET), the APMEX Precious Metals spot prices were:

• Gold, $1,175.50 Down $25.10
• Silver, $17.26 Down $0.25
• Platinum, $1,240.00 Down $7.90
• Palladium, $794.50 Up $12.80

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