Weekly Gold & Silver Market Recap – 5/10/2013


GOLD ENDS WEEK LOWER
As the week comes to a close, Gold is sitting at a two and a half week low. On Tuesday, the first of numerous reports that affected the price of Gold came out of Europe regarding formation of a banking union. This has caused a belief that there will be less financial risk in the region, which has in turn caused a drop in safe haven assets such as Gold. “Any indication that Europe is working towards a resolution is bad for Gold,” Adam Klopfenstein, a senior market strategist at Archer Financial Services Inc. in Chicago, said in a telephone interview. “Money is flowing into riskier assets like equities.” The next move in the Gold price came on Wednesday when the U.S. weekly jobless claims fell to a five year low. Improved labor conditions tend to put pressure on the yellow metal due to the Federal Reserve’s preservation of a low federal funds rate as compared to the unemployment rate. If the Fed raises interest rates, the market perceives that as a sign they may also cut back on current monetary policy, which makes Gold shine as a safe haven asset. “Jobless claims were better than expected, indicative of a recovering U.S. economy, and the dollar is a little bit stronger … In that kind of environment you would expect Gold to come under pressure,” Deutsche Bank analyst Daniel Brebner said. The Gold price declined as the U.S. dollar strengthened against the yen and investors focused on Federal Reserve Chairman Ben Bernanke’s speech Friday morning. Expectations that Bernanke might reveal a plan to slow the Fed’s bond purchase program weighed on the metal as similar rumors have negatively impacted Gold in the past. Friday’s price dip drove Gold down 2.5 percent to its lowest level in two weeks.

GOLD STILL SHINES FOR MANY
Even in the face of lower Gold prices, many investors and market analysts believe the future for the yellow metal is strong. Investors have noticed the movement metals have experienced and continue to feel confident purchasing hard assets. New concerns come from the Federal Reserve’s proposal to modify quantitative easing (QE) based on recent positive economic data. “With the Fed’s recent commitment to stand ready to alter the pace of QE, based on employment and inflation expectations, bullion prices are likely to remain highly sensitive to changes in U.S. employment data,” HSBC said in a note. Andy Xie of MarketWatch believes that with growth stuck at about a two percent range and inflation seemingly rising in the future, the U.S. is in a period of stagflation. Xie wrote, “Despite its recent setback, Gold remains a big beneficiary of the current macro environment. It could make a new high in the current year and rise much higher in 2014. The Gold bull market will end when an inflation crisis pushes central bankers around the world to tighten aggressively… For the masses, Gold is the best inflation hedge.” Last month, Gold imports into China more than doubled, setting an all-time high. One of the most impressive things to note is that all of this happened before Gold’s price dropped in April. “This is quite out of expectation as all these imports were done before the market slump in April. Judging from the explosive growth of trading volume on the Shanghai Gold Exchange in the second half of April, and anecdotes that many jewelry shops are sold out throughout the country, imports might be even more substantial in April,” said Qu Mingyu, a trader at Bank of China, one of the country’s three largest bullion banks.

At 4:00 pm (EDT), the APMEX precious metals spot prices were:

Gold, $1445.30, Down $25.60.
Silver, $23.85, Down $0.15.
Platinum, $1491.80, Down $26.20.
Palladium, $709.00, Down $7.80.

For more APMEX reviews of daily and weekly Precious Metals market activities, visit our News and Commentaries page.