Daily Gold & Silver Market Report – 12/16/2016

Cassie Bastien

12/16/2016 1:44:00 PM

GOLD ON TRACK FOR SIXTH-STRAIGHT WEEKLY LOSS

After a tough few days following news of Federal Reserve rate hikes, the yellow metal is showing improvement Friday morning but still on track for its sixth-straight weekly loss. On Thursday, Gold prices hit their lowest since February due to investors piling funds into the U.S. dollar, stocks and even oil. Rachel Koning Beals with MarketWatch said, “Bond selling largely continued, driving up the yields that undermine the attractiveness of holding nonyielding Gold. … The prospect of a more-aggressive Federal Reserve in 2017 sent the buck surging and weighed on Precious Metals that are pegged to the dollar’s value.” Gold for February delivery rose 0.6 percent early Friday to $1,136.00 an ounce after seeing their lowest close Thursday since February 2, at $1,129.80 per ounce. According to data from Dow Jones, Thursday saw Gold’s largest single-day loss, both dollar and percentage, since November 11. The dollar moved slightly Friday but overall held against the euro. Iron FX Global Senior Analyst Charalambos Pissouros said “Expectations of greater fiscal stimulus from the [President-elect Donald] Trump administration leading to higher inflation, combined with the [Fed’s] surprisingly hawkish signals, led to a fresh round of selloff in U.S. bonds. As a result, Treasury yields rose, driving renewed dollar strength across the board.” Higher interest rates usually result in a stronger dollar, which can pressure commodities such as Gold. Also, noninterest-paying assets like Precious Metals lose their appeal on increasing interest rates. So what happens if scales tip toward worrisome inflation views? Beals said, “Gold could resume some demand as a haven from the assets whose value can be chewed up by inflation.”

DOLLAR RALLY PAUSES POST-FED AS EUROPEAN STOCKS REACH NEW HIGH

While the dollar’s rally paused Friday, European stocks climbed to an 11-month high on merger and acquisition speculation. Reuters Atul Prakash said, “World stocks as measured by the MSCI world equity index, which tracks shares in 46 countries, rose 0.18 percent. Japan's Nikkei gained 0.7 percent after rising to a one-year peak on the export prospects from a weaker yen.” It’s no secret that financial markets across the globe have been choppy since the Fed’s meeting Wednesday. Prakash reported, “the dollar index, which tracks the U.S. currency against a basket of six other major currencies, stood at 102.970, or down 0.05 percent.” On Thursday, it rose to a 14-year high of 103.56, while European shares were up 0.16 percent. With major stock indexes likely to reach new highs, analysts and traders said the European stock market's outlook remained generally positive in the medium term. Markus Huber, a trader at City of London Markets, said, “Stocks are continuing to get a boost from a weaker euro and the notion that the United States … will experience an uptick in growth once President-elect Trump has started implementing his new policies.” Driving the benchmark U.S. Treasury 10-year yield to its highest in more than two years was the possibility of a tighter Fed monetary policy. "Inflation-linked bonds are starting to look attractive again, while high-yield bonds, particularly U.S., merit greater caution," Pictet Asset Management Chief Strategist Luca Paolini said. However, Prakash ended, “two-year German government bond yields dropped to record lows after the European Central Bank's recent tweaks to its asset-purchase program.”

SILVER PRICES RECOVER AFTER SELL-OFF

Silver prices are consolidating Friday after a 7 percent plunge as the gray metal headed for a large weekly drop. EconomicCalendar.com’s Sam Bourgi reports “Silver prices crashed 7.3 percent on Thursday as markets dissected the Federal Reserve’s decision to raise interest rates.” Silver has declined more than 9 percent since the beginning of November and is on track for a weekly loss of almost 5 percent. Following the Fed’s decision Wednesday, the greenback saw huge advances against the euro, yen, franc and Canadian dollar. Bourgi closed saying, “U.S. stock futures were trading higher in pre-market activity, signaling a continuation of Thursday’s rebound.”

At 2:44 P.M. (ET), the APMEX Precious Metals spot prices were:

• Gold, $1,136.90 Up $6.30
• Silver, $16.14 Up $0.17
• Platinum, $926.90 Up $31.30
• Palladium, $691.80 Down $14.90

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