Daily Gold & Silver Market Report – 11/30/2016

Cassie Bastien

11/30/2016 11:37:00 AM

UNCERTAINTY FOR GOLD

Many have been disappointed in the yellow metal with the hopes that higher inflation and uncertainty would boost the price of Gold. With that being said, “the Gold bulls were somewhat correct in the sense that uncertainty is in fact good,” as Chris Dillow from Investors Chronicle said. “If we measure these by the gap between five-year conventional U.S. Treasury yields and their inflation-proofed counterparts, they are indeed positively correlated with the Gold price, if we control for other things. All this poses the question: if the bulls were right in these respects, why has Gold fallen? Simple. It's because two other things have outweighed these bullish factors.” Dillow said one of those reasons is due to the rise in the U.S. dollar. He says that holders of other currencies find if the dollar rises, they can buy less Gold than they can for given amounts of yen or euros. In addition to that, real interest rates have increased since the election of Donald Trump, which was measured by five-year inflation-proofed bond yields; higher yields mean lower Gold prices. Still, Dillow says, “Gold has fallen because real bond yields and the dollar have risen. And these factors are strong enough to outweigh the benefits to Gold of higher inflation expectations and greater uncertainty.” Dillow wrote an article in February about Gold's attraction hinging on expectations it would do well on negative interest rates. He argued this type of insurance was worth having as falling interest rates likely point to a weak global economy and poorly performing equities. However, Dillow explained, “Trump's promise of a big fiscal stimulus has reduced the risk of low bond yields, so we've lost money on insurance against that risk.” On the other hand, for those with a balanced portfolio, “this loss on Gold has been tolerable because it has come at a time when equities have done okay. … It's possible that real interest rates and the U.S. dollar will fall back - either because the global economy disappoints expectations again or because investors fear that Trump's anti-globalization agenda will depress long-term growth.” In those circumstances, a Gold recovery would be welcomed by investors. All things considered, Dillow closed with “The case for holding Gold as a means of spreading risk is, therefore, still a good one.”

HIGHER PRODUCTION MEANS HIGHER PRICES

ETF Daily News says the cloudy days over the gray metal should soon be lifted. According to the Silver Institute’s 2016 Silver Interim Report by Thomas Reuters GFMS, “global Silver production will decline to 887 million ounces (Moz), down from 893 Moz in 2015.” Although 2016 Silver production is only down slightly compared to 2015, the report from GFMS also stated, “We estimate that mine supply peaked in 2015 and will trend lower in the foreseeable future” in addition to, “Declining total supply is expected to be a key driver of annual deficits in the silver market going forward.” The Silver market is forecast to suffer a 185 Moz deficit in 2016 due to the vast increase in global Silver ETF demand and a large exchange inventory build. At some point, the decline in production combined with continued deficits will lead to higher Silver prices. Many people think that once the current ‘risk-on’ post-Trump trade wears thin, Silver will likely see an immense bounce. ETF closed with “The iShares Silver Trust ETF fell $0.14 (-0.89%) to $15.63 per share in premarket trading Tuesday. Year-to-date, the largest exchange traded fund tied to silver prices has gained 19.56, but the fund is now 20% off its 52-week high of $19.71.”

At 12:37 P.M. (ET), the APMEX Precious Metals spot prices were:

• Gold, $1,214.80 Down $15.30
• Silver, $16.64 Down $0.20
• Platinum, $931.00 Down $12.20
• Palladium, $726.00 Up $9.40

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