Daily Gold & Silver Market Report – 11/28/2016

Cassie Bastien

11/28/2016 3:26:00 PM

DOLLAR STARTS TO REDUCE AS GOLD PRICES INCREASE

With the U.S. dollar showing a slow pullback, the Precious Metals market starts to strengthen after experiencing its lowest in February of this year. The dollar index has recently been on a run that’s boosted the gauge to its highest level since April 2003, which has hurt Gold prices. The movement has stemmed largely from expectations that the Federal Reserve will raise rates at its meeting on December 13-14^th and that it will continue raising rates if spending plans by the incoming Trump administration result in inflationary pressure on the U.S. economy. Carla Mozee from MarketWatch states that “Gold futures for December delivery GCZ6, +0.74%  rose $14.50, or 1.2%, to $1,192.80 an ounce. That follows Friday’s session when the lead contract fell 0.9% to $1,179 an ounce. Prices last week lost roughly 2%.” Ilya Spivak, senior currency strategist at DailyFX, said in a blog post Monday that “The move is accompanied by a parallel decline in the U.S. dollar and U.S. front-end yields as implied in 2-year Treasury futures.” Spivak also stated that “this hints at moderation in the Fed rate hike outlook as the catalyst behind the returning appeal of anti-fiat and non-interest-bearing assets, including the yellow metal.” The question is will this increase in Precious Metals continue to grow? According to Richard Perry, a market analyst from Hantec Markets says that “momentum indicators remain negatively configured and there is little to suggest that a recovery will be any more than another opportunity to sell.”

THE U.S. DOLLAR FALLS AGAINST YEN

As caution wept markets ahead of a busy week for economic data and events, the dollar fell against the yen and eased back against other currencies on Monday. Hiroyuki Kachi from MarketWatch said that “Saudi leaders backed out of a Monday meeting between OPEC members and other non-OPEC producers including Russia, strengthening doubts that an effective deal can be reached on reining in production at Wednesday’s main OPEC meeting.” In addition to that, the Saudi energy minter Khalid al-Falih said that the oil market should rebalance by itself, even questioning the need for production cuts. The latest uncertainty is pushing investors into the perceived safety of the yen, making them “…very, very nervous about the oil scenario…” said Stephen Innes, a senior foreign-exchange trader at Oanda. FXTM’s research analyst Lukman Otunuga added that “November has been a game changer for the dollar with Trump’s market-shaking victory, repeated positive U.S. data and hawkish comments from Fed officials ensuring dollar strength remains a recurrent theme.” With expectations that the new administration will boost fiscal spending and lower taxes in a move that could accelerate inflationary pressure, the dollar has staged a solid rally following the Presidential election of Donald Trump. Koji Fukaya, the FPG Securities chief executive, said that “the U.S. stock market’s recent gains are based only on expectations, while higher U.S. yields that have been pushing up dollar eventually will put a brake on the U.S. economy,” followed by “Investors need to be prepared for a turnaround and turbulence in the market.” Kachi ended by stating that with the upcoming events, those are likely to shape the direction of the dollar, determining whether the Trump surge renews or dissipates.

SILVER SLUMPED TO BEAR-MARKET

Due to the movement in the U.S. dollar, Silver is now moving towards the bear-market territory. According to Dow Jones data, as of Wednesday Silver futures SIZ6, +0.67%  had sunk 20.1% from their 52-week high of $20.666 an ounce, reached on August 2^nd. However, Silver managed to catch a break on Friday, rising roughly to $16.48. Silver and gold prices “remain troubled by the current focus on rising dollar and bond yields. The resilience seen among investors using exchange-traded products has started to fade with reductions seen the past nine days,” wrote Ole Hansen, head of commodity strategy at Saxo Bank. Since Donald Trump prevailed over Hillary Clinton in the November 8^th U.S. presidential election, Silver prices, along with the iShares Silver Trust SLV, +0.80% exchange-traded fund, have lost roughly 10%. Carla Mozee with MarketWatch said that “His win sent Treasury yields TMUBMUSD30Y, -0.80%  surging, and prices lower, as investors prepare for possible inflationary pressures from Trump’s plans for mass-scale spending on infrastructure projects. Higher inflation hurts long-term bonds as it eats into the value of interest payments.” With that in mind, higher inflation hurts long-term bonds as it eats into the value of interest payments. Looking into 2017, “we are still not convinced that yields and the dollar will move much higher beyond January,” wrote Hansen. “If that turns out to be the case and inflation continues to rise, we could see support for [Silver and Gold] get re-established.”

At 04:26 P.M. (ET), the APMEX Precious Metals spot prices were:

• Gold, $1,214.80 Up $13.90
• Silver, $16.64 Up $0.15
• Platinum, $931.00 Up $15.70
• Palladium, $726.00 Up $15.90

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