Daily Gold & Silver Market Report – 12/23/2016

Cassie Bastien

12/23/2016 9:43:00 AM

DOLLAR HOVERS BELOW 14-YEAR HIGH

As a modest bout of buying emerged following an early round of profit-taking, the dollar hovered below a 14-year high reached earlier this week. Richard Leong with Reuters said, “Traders brushed off mostly upbeat U.S. economic data as they refrained from adding bullish dollar bets ahead of Christmas. Ed Al-Hussainy, senior interest rate and currency analyst at Columbia Threadneedle Investments in Minneapolis, said, “We have had a big rally and we are due to for a breather.” The dollar index was marginally higher Friday at 103.08 but still below the 14-year high of 103.65 set Tuesday. After the U.S. Federal Reserve's hint at raising interest rates up to three times in 2017, the dollar posted a series of multiyear highs, one more than what some traders anticipated. Leong says, “As they awaited details on economic policies from the [Donald] Trump administration, traders and analysts cautioned that the dollar, which has risen 5 percent on an index basis since November 8, was vulnerable to a further pullback.” Stephen Casey, senior currency trader at Cambridge Global Payments in New York, said “The trend is definitely for a stronger dollar. Any dip in the dollar will be a buying opportunity.” On the other hand, the euro was up 0.1 percent in the aftermath of plans to rescue Monte dei Paschi di Siena, Italy's second-biggest bank.

SILVER PRICES PLUMB EIGHT-MONTH LOWS

As Precious Metal demand remained weak in pre-holiday trading, the price of Silver was pressured Thursday. Sam Bourgi with EconomicCalendar.com reported “March Silver futures declined 0.5 percent to $15.89 a troy ounce at 9:16 am ET. Prices traded within a daily range of $15.83 and $16.07. The grey metal has declined roughly 2 percent this week, pushing prices toward their lowest level since early April.” After the Fed raised interest rates for just the second time in a decade, Precious Metals were under renewed pressure. Bourgi noted, “The prospect of a faster rate hike cycle also deflated expectations that Precious Metals would rally in the new year on safe haven demand. … A stronger dollar adds downward pressure on Precious Metals, which are themselves priced in the U.S. currency.”

GOLD EDGES HIGHER

As the dollar retreated from this week's high, Gold edged higher Friday in thin pre-Christmas trade, “tempting some buyers to take advantage of a near 10-month low in prices after six straight weeks of decline,” Reuters market analyst Jan Harvey reports. “Gold has fallen more than $200 an ounce from its peak hit in the immediate aftermath of Donald Trump's U.S. presidential election victory on November 8, as his win sparked a dollar rally and drove U.S. Treasury yields higher.” In Q1, the yellow metal posted its biggest quarterly increase in 30 years. LBBW analyst Thorsten Proettel said, "With no real political or economic events to shock markets, and with Asian markets seeing dull demand, I would say not much will happen until January. We see Gold holding around $1,130 [per ounce]." He added "The most important drivers for Gold right now are the exchange rate from the dollar to the euro, and real U.S. interest rates." Rising interest rates boost the dollar, increasing the opportunity cost of holding non-yielding bullion like Gold. "There is a risk that the prices of Gold and Silver might fall further in the short term as the Fed hikes rates more aggressively in response to some of Trump's more inflationary policies," Capital Economics said in a weekly note. Harvey stated, “Holdings of the world's largest Gold-backed exchange-traded fund have fallen more than 12 percent since November.” Silver was slightly down Friday at $15.78 per ounce, while Platinum was 0.4 percent higher an ounce and Palladium was up 0.2 percent.

At 10:43 A.M. (ET), the APMEX Precious Metals spot prices were:

• Gold, $1,134.80 Up $3.00
• Silver, $15.82 Down $0.06
• Platinum, $903.20 Down $5.20
• Palladium, $656.10 Down $2.00

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