Daily Gold & Silver Market Report – 12/05/2016

Cassie Bastien

12/5/2016 10:41:00 AM

GOLD IS DOWN DUE TO ITALY’S REFERENDUM

As European equities strengthened Monday following investors shrugging off worries of Italian political instability, Gold fell more than 1 percent. Clara Denina with Reuters said, “Spot Gold fell by as much as 1.2 percent to a session low of $1,162.35 an ounce, within sight of a 10-month low of $1,160.38 hit last week, and was down 0.7 percent at $1,169.29 by 1302 GMT. U.S. Gold futures shed $7.80 to $1,170.10.” After Italian Prime Minister Matteo Renzi said Sunday he would resign, the euro recovered from an earlier two-year low against the U.S. dollar. However, the yellow metal remained pressured by stronger European shares, as investors expect the European Central Bank to step in if needed. Denina stated that, “Higher appetite for risk curbs the appeal of assets viewed as safer, such as Gold.” Gold fell more than 8 percent in November on a boosted dollar and Treasury yields following the surprising election of Donald Trump and his promise to increase growth and inflation with infrastructure spending. Following Gold’s decline, Silver dropped 0.4 percent to $16.66 an ounce. Platinum rose 0.1 percent to $929.30 an ounce while Palladium was down 1.1 percent to $731 an ounce.

SILVER PRICES RECOVER

There was a sharp rally in Silver prices, and Precious Metals in general, after U.S. employment data led to a significant decline in bond yields. Tim Clayton from Economic Calendar.com said that “…Silver drifted lower late in the U.S. session on Thursday and continued the trend in Asia on Friday with a move to $16.60 [per ounce] in tight ranges. There was further selling interest in Europe with a retreat to $16.40 despite a slightly weaker dollar tone and modest pullback in bond yields.” Further surprise came from other metrics, including the U.S. unemployment rate dropping from 4.9 percent to 4.6 percent, its lowest since mid-2007, increasing speculation the economy is at full employment. Clayton said, “The average earnings data was weaker than expected with a 0.1 [percent] decline on the month, which lowered the annual increase to 2.5 [percent] from 2.8 [percent] and compared with the consensus forecast of a steady rate of 2.8 [percent],” which could be due to the effects of the calendar. “After initial choppy trading, Silver pushed sharply higher as bond yields continued to decline with a rally in Gold prices also boosting confidence in Silver as it pushed to highs above $16.80 and registered a small gain for the week as a whole,” Clayton stated. The Italian referendum scheduled for early this week, and the reactions following, will be watched closely.

OIL DEMAND ON THE RISE

Although recently agreed production cuts could raise oil prices, the Organization of the Petroleum Exporting Countries (OPEC) expects the 2017 oil demand to be as strong as 2016. Promit Mukherjee and Sudarshan Varadhan with Reuters wrote OPEC is “looking to reduce production by about 1.2 million barrels per day [bpd] beginning in January to try and reduce global oversupply and prop up prices.” OPEC Secretary General Mohammed Sanusi Barkindo said OPEC has invited non-OPEC countries such as Russia, Columbia, Egypt, Mexico, Trinidad and many more to a meeting December 10 to discuss their support.  Mukherjee and Varadhan write, “Oil prices have risen since the production agreement, with benchmark Brent crude oil futures soaring on Monday to its highest since July 6, 2015 to $55.20 a barrel.” With that being said, many buyers such as India, who imports more than 80 percent of its crude oil, are starting to get worried. Barkindo said OPEC members were heavily invested in ensuring supplies would be able to meet global demand. Although it is many years from now, OPEC estimated that world oil demand will rise by 17 million barrels per day to approximately 110 million by 2040.

At 11:41 A.M. (ET), the APMEX Precious Metals spot prices were:

• Gold, $1,214.80 Down $9.60
• Silver, $16.64 Down $0.05
• Platinum, $931.00 Up $3.00
• Palladium, $726.00 Up $4.30

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