Weekly Gold & Silver Market Report – 8/1/2014


HEAVY WEEK OF ECONOMIC NEWS

The Gold price began the week on a high note following a slight loss as a stronger U.S. dollar put pressure on the yellow metal. The week was full of extensive economic data and events, which was expected to provide clues to when the Federal Reserve would increase interest rates. The Fed’s policy meeting concluded Wednesday, the same day that second-quarter gross domestic product data was released. Thursday marked the usual weekly jobless claims report, and Friday brought the heavy hitter — non-farm payrolls figures.

RUSSIA AND TURKEY ADD MORE GOLD FOR THE THIRD STRAIGHT MONTH

Russia and Turkey continue to add to their Gold holdings. According to the International Monetary Fund (IMF), this is the third straight month that both countries have added to their bullion reserves. The drop in June of Gold prices prompted many central banks to add to their Gold position as protection from currency and credit risks. Russia is the fifth largest holder of bullion reserves after the United States, Germany, Italy and France. China is sixth, but it should be noted that they have not officially reported their Gold holdings since 2009. Turkey comes in at number twelve.

Mohamed El-Erian published an article in Bloomberg Monday, that lays out the five key issues faced by Fed Chair Janet Yellen and why we should not be fooled by her comforting “steady as she goes” façade. He points out that one of the unwritten rules about central bank policies is that no big policy changes should happen in the summer. There are too many traders across the globe on holidays, so any sudden move could destabilize markets. According to El-Erian, vacations will end and then the Fed will face five complex and inter-related issues:

1) To what extent is the central bank policy approach increasing the risk of financial instability? 2) How much damage did the recession actually cause and does this mitigate the effect of Fed policies? 3) How quickly will the gain in new jobs translate into wage gains and will these wage gains undermine 2 percent inflation goals? 4) How should they respond to the continued parade of geopolitical shocks? 5) By carrying the bulk of the economic stimulus burden is the Fed undermining the political and operational autonomy necessary for its effectiveness?

GOLD LOWER AS INVESTORS AWAIT FED MEETING OUTCOME

The Gold price retreated from a one-week high Tuesday as investors waited for the outcome of Wednesday’s Federal Reserve’s policy meeting. Though geopolitical turmoil in the Middle East and Ukraine continues to assist in buoying Gold and Silver, hawkish comments from Fed Chairwoman Janet Yellen regarding the future of interest rates in the U.S. could weigh on metals. “I’m actually surprised that gold isn’t up more, given the numerous geopolitical risks,” Commerzbank analyst Daniel Briesemann said. If escalating tension overseas continues to persist, safe-haven demand for Gold and Silver could increase in the short-term.

METALS FLAT AFTER DATA, FED ANNOUNCEMENT

Precious Metal prices finished the day trading mostly sideways on Wednesday. After the Federal Reserve hinted toward their plan to continue tapering asset purchases and maintain an easy monetary policy, stocks and Precious Metals wavered slightly. However, with jobs data expected to be released Friday, investors kept a watchful eye. Bruce McCain, chief investment strategist at Key Private Bank, said, “The bulls look at the strength in the second quarter, and the skeptics say you’re getting a lot of bounce back from first-quarter weakness. The question is how do things look in the third and fourth quarters, and the answer is we don’t know. A lot hinges on the employment report on Friday.”

GOLD COULD BE STRONG BET AS STOCKS TUMBLE AND IMPROVEMENT GOES UNREALIZED

The Gold price dipped lower Thursday as the yellow metal is set to post a 3.1 percent loss for the month of July. Strong U.S. employment numbers added to the current downward pressure on Precious Metals. Though reports point to a rebound in the U.S. economy, many individuals are not experiencing the improvement first-hand. Many of the jobs added are part-time positions, which leave countless underemployed. Income has yet to improve as Americans continue to watch the gas prices and other goods rise higher and higher. With looming geopolitical crises escalating, fear of a stock market correction and mounting national debt, many investors still feel the need to protect themselves with safe-haven assets like Gold and Silver.

JOBS REPORT DISAPPOINTS DESPITE MILESTONE

Gold and Silver prices recovered from early losses Friday after the highly anticipated jobs report. Though the U.S. Labor Department’s jobs report released Friday morning showed the first time since 1997 that the economy has seen 200,000-plus gains in six straight months, the 209,000 jobs added in July missed the mark expected by analysts. The unemployment rate increased to 6.2 percent, and the Labor Department believes this is due to more people entering the workforce and looking for work.

At 4:25 p.m. (ET), the APMEX Precious Metals spot prices were:

  • Gold, $1,294.30, Up $12.00
  • Silver, $20.36, Down $0.05.
  • Platinum, $1,466.00, Up $0.80.
  • Palladium, $866.70, Down $8.00.

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