Daily Gold & Silver Market Report – 12/21/2016

Cassie Bastien

12/21/2016 9:35:00 AM

SILVER PRICES AT RISK OF SLIPPING

Silver prices, along with other Precious Metals, dropped last week following the Federal Reserve’s rate hike announcement. Market Analyst Paul Robinson with DailyFX says, “…we aren’t seeing much of a response by buyers to defend this area, slipping through at the time of this writing. A failure to hold here sets Silver up for further downside.” Robinson showed a daily Silver graph saying, “Should Silver firmly trade into the eyed zone, we might not see a precipitous drop to the next set of levels, but we will maintain a bearish outlook as long as it stays beneath the once support now turned resistance at 16/15.80 [per ounce].” He feels Wednesday could be important, as Silver tries to slip into the next “air pocket”, but senses a daily close back above support “would put this bias on hold for another day.”

INDIA’S DEMONETIZATION ON GOLD

As Reuters Clyde Russell explains, “Given all the surprises over the U.S. presidential election, the British vote to leave the European Union and general concern about the health of the global economy,” Gold was on track to have a good year. However, things didn't quite pan out and now the Gold bulls “face a new year where the price of the Precious Metal is likely to be hostage to developments that are inherently unpredictable. The two main risks for the Gold outlook for 2017 are what actually happens in the presidency of Donald Trump and how the demonetization of Indian Prime Minister Narendra Modi plays out in the world's second-largest consumer” of the yellow metal, Russell says. Gold had a strong start to 2016 but has since dropped 17.5 percent, closing on Dec. 16 at $1,133.99 per ounce. With that being said, Russell says “much of the newly-found optimism is based on the view that Trump will be able to kickstart the U.S. economy through his plans to spend around $1 trillion on infrastructure and other projects.” The Trump presidency has given the market bearish expectations for Gold on as a rising U.S. dollar and interest rates. Russell says that, “While Trump has clearly stated he wants to boost the U.S. economy, he has also clearly stated he intends to take the U.S. out of global and regional trade agreements, and impose tariffs on goods on various countries, including China.” With hopes that Trump will do all the right things for the economy, Gold has the opportunity to gain in 2017 if Trump disappoints. Gold’s 2017 outlook will also depend on what happens in China and India, as China's Gold demand has dropped in 2016, with third quarter consumer demand down 22 percent from the same period in 2015. India's own consumer demand is down 28 percent. It is likely that Gold demand will be hurt by India’s demonetization, but no one is sure how long. As Russell says, “It’s possible that as cash shortages ease, consumer Gold demand will bounce back. But it’s also possible that the government's aim of cracking down on the informal economy will hurt Gold demand as consumers are left with little choice but to put money into banks rather than use cash to buy Gold.” Similar to Trump’s presidency, the impact of India's demonetization on Gold demand is far from certain.

OIL’S NEXT MOVE IS LIKELY TO BE UPWARD

During Tuesday trading, crude oil prices saw a fifth-straight session of gains on expectations of a draw in U.S. crude oil inventories. While a Reuters poll indicated a weekly draw of 2.4 million barrels in U.S. crude stockpiles, the American Petroleum Institute reported a draw of 4.15 million barrels. With that being said, the official Energy Information Administration report is due Wednesday so prices could move either way. Alexander Gorodezky with EconomicCalendar.com reported “International Brent crude oil surged by 64 cents to settle at around $55.56 per barrel, while U.S. West Texas Intermediate crude oil increased 11 cents to settle at around $52.23 per barrel,” but analysts believe crude oil prices have more upside than downside potential. Ritterbusch Associates President Jim Ritterbusch said in a note that oil’s next move of $4 is likely to be up. Gorodezky says, “crude oil supplies are likely to surpass demand in the next year considering OPEC and non-OPEC production cut of almost 2 percent from their current levels.” Early Wednesday, the crude oil price rally continued in Asian and European trading, “indicating that the global oil glut is easing. U.S. oil was trading around $53.65, while Brent crude oil was trading around $55.70 a barrel on Wednesday,” Russell reports.

At 10:35 A.M. (ET), the APMEX Precious Metals spot prices were:

• Gold, $1,136.10 Up $2.20
• Silver, $16.09 Down $0.05
• Platinum, $915.50 Down $10.50
• Palladium, $658.80 Down $13.20

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