Daily Gold & Silver Market Report – 12/27/2016

Cassie Bastien

12/27/2016 11:20:00 AM

STOCKS INCREASE DURING HOLIDAY LULL

As trading in major financial markets resumed Tuesday following Christmas break, share prices increased along with oil and the U.S. dollar. Patrick Graham with Reuters said, “Concerns about Italian banks, Chinese growth and U.S. President-elect Donald Trump's protectionist bent look set to keep investors on edge into the start of 2017.” Data released Tuesday showed Chinese industry’s November profit growth the strongest in three months, suggesting the world’s second-largest economy was improving. However, Japanese core consumer prices fell for the ninth month as household spending declined. Daniel Lenz, a bond market strategist with DZ Bank in Frankfurt, said, “Markets have calmed down a lot since the U.S. election and the decisions by the [European Central Bank] and [Federal Reserve] (earlier in December).” Graham reported, “Germany's DAX and France's CAC 40 both gained just over 0.1 percent and U.S. markets were seen opening similarly. … The [Japanese] yen fell following the inflation numbers but was still around 1 yen stronger than lows hit after the U.S. Federal Reserve raised dollar interest rates two weeks ago.” IG market Strategist Jingyi Pan wrote in a note, "It is the time of the year when markets trade with hushed tones. The magnitude of moves could remain capped with thin market trades expected to remain the case." Graham ends saying, “In a currency market expected to trade conservatively into the end of the year, strategists say they will be watching chiefly for any sign of a squeeze in the cost for banks of borrowing dollars relative to other currencies. Such costs - called the cross currency basis - have been rising and could support the dollar over the next few days.”

WEEKLY OUTLOOK FOR GOLD

Gold prices edged slightly higher Friday ahead of the holiday weekend but the Precious Metal still posted its seventh straight weekly decline on expectations for higher U.S. interest rates. Investing.com reported “Gold for February delivery on the Comex division of the New York Mercantile Exchange tacked on $2.90, or 0.26 percent, to end the week at $1,133.60 a troy ounce, not far from an 11-month low of $1,124.30 touched on December 15. For the week, Gold futures slumped 0.33 percent, the seventh straight week of declines, its longest weekly losing streak in more than 12 years.” Since Trump won the presidential race, Gold prices have fallen sharply as the dollar, Treasury yields and Wall Street have risen, dampening the metal’s appeal. NASDAQ reports the dollar index dropped 0.1 percent to close at 103.00 Friday before reaching 103.62 Tuesday, its strongest level since December 2002. Analysts warn the near-term outlook for Gold remains cloudy as higher interest rates are expected. As Investing.com reports, “The Precious Metal is sensitive to moves in U.S. rates, which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar in which it is priced. Both a strong dollar and higher interest rates are typically bearish for Gold, which is denominated in dollars and struggles to compete with yield-bearing assets when borrowing costs rise. … The U.S. is to release reports on consumer confidence, pending home sales and jobless claims, as traders look for further indications on the strength of the economy and hints on the future path of monetary policy.”

SILVER IS THE NEW GOLD

As EconomicTimes reports, “Commodity experts and bullion traders feel that Silver can trump Gold in coming months as demand for the metal is increasing for solar panels and electronics sector. Demand for Silver is increasing in the home décor and fashionable jewelry categories in the country which may push the price of the metal by almost 15-20 percent in 2017.” Bullion traders believe total Silver imports may not reach 5,000 tons this year on low demand traders offloading the metal in the market and booking profit. Surendra Mehta, general secretary at India Bullion & Jewellers Association (IBJA), said, “We are expecting Silver prices to appreciate by 15 -20 % percent next year.” Silver gained 16 percent in 2016 while Gold increased just 9 percent. Gnanasekar Thiagarajan, director at Comtrendz Risk Management Services, says, “We have seen that when Gold prices rally, Silver prices outperform Gold. 2017 is expected to be a good year for Silver. Investors, who want to take a position in Silver, can get good returns if they stay invested for a longer horizon.”

At 12:20 P.M. (ET), the APMEX Precious Metals spot prices were:

• Gold, $1,139.00 Up $4.20
• Silver, $15.93 Up $0.15
• Platinum, $908.20 Up $14.00
• Palladium, $676.60 Up $22.30

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