Daily Gold & Silver Market Report – 12/22/2016

Cassie Bastien

12/22/2016 10:36:00 AM

IS IT TIME TO BUY SILVER?

The Silver rally that occurred between January and October came to an abrupt halt after Donald Trump won the U.S. presidential election. ETF Daily News says, “Trump’s proposed fiscal stimulus measures will boost growth, leading to higher interest rates and a stronger dollar. In fact, [the Federal Reserve] raised the benchmark interest rates by a modest 25 bps to 0.50–0.75% a couple of days back, confirming the U.S. economy’s growth momentum and the labor market’s security.” Following the interest rate hike, the Fed forecast three additional rate hikes in 2017. ETF Daily News says “an increase in rates will rob Silver of its sheen since it is not a yield generating investment. The oil scenario has also not improved with oil prices recovering on the new output deal.” As a result, Silver has been steadily falling since the election, but will this trend continue? The signs of recovery are slowly fading but ETF Daily says “there are still chances that Silver will see a turnaround. Silver has high usage in industrial activities with about 50 percent of the total demand coming from industrial applications.” Furthermore, U.S. market conditions are slowly improving, which is expected to further boost Silver’s industrial demand.

ALL THAT IS GOLD DOESN’T GLITTER

Since the November U.S. presidential election, investors have fled from the yellow metal; with the SPDR Gold Trust, the largest exchange-traded fund tracking Gold, seeing a massive spike in outflows. According to FactSet data, the fund has seen a record of outflows for 28 straight sessions. Ryan Vlastelica with MarketWatch says, “Almost $4.7 billion has been withdrawn from the $30.2 billion fund since the election, making it one of the hardest hit of any fund in the ETF universe.” Because Gold typically has an inverse correlation with the stock market, Vlastelica says, “Investors have been betting that massive corporate tax cuts and environmental and financial deregulation Trump has proposed will accelerate economic growth, making the yellow metal less attractive as an asset. The gold ETF is down 11.3 percent since the election, recently falling to its lowest level since February. However, it remains positive for the year, holding on to a 6.3 percent advance for 2016.”

MILLENNIALS HIT WITH BAD NEWS

A recent study from a team of sociologists and economists shows just 51 percent of 30-year-olds enjoy higher earnings than their parents did at that same age, while a study by the Society of Actuaries predicts that millennials won’t live as long. Essentially, millennials have less time to spend whatever they manage to save. Mark Avallone with MarketWatch says, “Blocking their path are what [he calls] the four enemies of the investor: bear markets; inflation; taxes, and emotions (BITE).” He feels the bear market is the toughest to avoid as this is beyond control of investors. Most millennials that witnessed the market crashes in 2000 and 2008 are hesitant to invest in stocks, similar to how depression-era children doubted the stock market. Avallone suggests “investing in stocks presents one of the best opportunities for younger investors to outpace inflation and have the purchasing power to enjoy retirement.” The second enemy, inflation, impacts millennials’ saving goals more than those nearing retirement. Avallone suggests a solution would be millennials choosing lower-risk (cash and bond) investments, which may pay a rate of interest less than the inflation rate. Third on Avallone’s list comes taxes, which affect all investors. Avallone says “taxes may prove to be more onerous for success-minded millennials than earlier generations” with our nation’s growth deficit. He suggests to set aside money and let it grow tax deferred to avoid an annual tax hit. However, setting something like that aside takes time and a lot can happen within that time including a lot of emotions. The ‘E’ to Avallone's “BITE” says “Emotional reactions to market gyrations can hurt your investment portfolio’s return.” It’s normal to get upset and want to back out when you see your savings and investments start to disappear. The point here is to wait it out and give it time. Another suggestion of Avallone is to not only know your risk tolerance, but to then “build a diversified portfolio that you can live with in bull and bear markets”. By doing this, it keeps the reaction to inevitable decline more rational.

At 11:36 A.M. (ET), the APMEX Precious Metals spot prices were:

• Gold, $1,133.80 Down $0.30
• Silver, $15.97 Down $0.03
• Platinum, $917.20 Up $1.80
• Palladium, $661.20 Up $0.20

APMEX’s Account Managers now have extended hours Mondays through Thursdays and are here to serve you until 8 p.m. (EDT)! Or call us Fridays until 6 p.m. (EDT)! If you have any questions about investing in Precious Metals or simply would prefer to place your order by telephone, we are here to help.