WEEKLY GOLD & SILVER MARKET RECAP – 5/16/2014

Domestic Economy Gaining Strength

The Gold price is set to realize a mild weekly gain today as strong U.S. economic data continues to hamper any significant rally for Precious Metals caused by the crisis in Ukraine.  Reassuring unemployment numbers, good home construction figures and strong corporate earnings all point to increasing strength in the domestic economy.  Benchmark equities indexes have reached all-time highs as the mounting improvement in macroeconomic data helped the Dow Jones Industrial Average and S&P 500 briefly realize record levels.  With geopolitical turmoil simmering in Ukraine and strong data regarding the U.S. economy struggling to force steady momentum for Precious Metals prices, Gold remains range-bound pending further impetus. 

Equities Markets could be higher in the short-term

U.S. stocks reached all-time highs on Monday with the S&P 500 and Dow Jones Industrial Average seeing little change through Tuesday.  “We’ve had a stealth rally in the market to this record,” Eric Marshall, a portfolio manager at Hodges Funds, said.  “The fact that we’ve moved up and hit new highs, in spite of some lingering negative sentiment is a very healthy and positive thing for the market.”  Investors are now awaiting the completion of earnings season as over 75 percent of S&P 500 organizations have weighed in with positive reports.  Ongoing strength in earnings data could force equities markets higher in the short-term.

Platinum and Palladium

Platinum and Palladium traded higher early in the week as supply concerns continue in South Africa due to ongoing miner strikes.  South Africa is responsible for a large portion of the world’s Platinum and Palladium production, which has been reduced by nearly 40 percent since the strikes began four months ago.   “A sudden end to the strike would lead to a sharp drop, but we believe the market is working under a structural production/consumption deficit, and we are therefore bullish medium – to longer-term,” James Steel, chief precious metals analyst at HSBC, said.

The Gold Price

U.S. unemployment figures dropped to their lowest level in seven years Thursday, dragging Gold down following Wednesday’s mild surge.  “Jobless claims dropping below 300,000 is a big deal and people are getting convinced that the economy is showing signs of recovery,” Phil Streible, a senior commodity broker at R.J. O’Brien & Associates, said.  However, signs of economic growth have fallen to force Gold too low as ongoing geopolitical turmoil in Ukraine is helping buoy the yellow metal.  The Gold price will more than likely maintain a tug-of-war while concerns regarding unrest in Ukraine struggle against the forces of continued domestic economic growth.

Stocks

Friday saw stock futures rise on housing data, a day after equities were pummeled by poor earnings from Wal-Mart. Alpari, U.K., Ltd. research analyst Joshua Mahoney said, “The hesitancy seen within markets could lead many to believe we are seeing a top and thus will be looking at more bearish set-ups.” Another bearish sign for stocks is the situation in Ukraine, with reports that Ukrainian troops are attempting to force separatists out of two towns serving as basis for the opposition.

 The Dollar

Gold and Silver turned lower in early morning trading Friday after housing data showed higher-than-expected new home construction numbers. VTB Capital analyst Andrey Kryuchenkov said, “Gold is still stuck in a narrow range because the downside is limited by geopolitical concerns and the upside is capped by generally good U.S. data, which suggest the [Federal Reserve] will carry on with the current pace of stimulus tapering. You have one central bank reducing its quantitative easing when the ECB (European Central Bank) does the opposite. From the simple perspective of the dollar, it should be relatively strong.”

Closing

In closing Friday, the Gold price is set to realize a mild weekly gain as strong U.S. economic data continues to hamper any significant rally for Precious Metals caused by the crisis in Ukraine.  Reassuring unemployment numbers, good home construction figures and strong corporate earnings all point to increasing strength in the domestic economy.  Benchmark equities indexes have reached all-time highs as the mounting improvement in macroeconomic data helped the Dow Jones Industrial Average and S&P 500 briefly realize record levels.  With geopolitical turmoil simmering in Ukraine and strong data regarding the U.S. economy struggling to force steady momentum for Precious Metals prices, Gold remains range-bound pending further impetus.  

Headed into the latter half of May, investors will continue to weigh the prospects for further unrest in Ukraine as they digest both domestic and global economic data.  Time will tell if U.S. stocks can continue their rally as Gold looks to find a catalyst to break out of its current trading range.

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GOLD FORECAST CHANGES; GOVERNMENT SPENDING QUESTIONED

Most financial experts are forecasting the Gold price to increase in 2013 for the 13th year in a row. However, some financial institutions are scaling back their initial Gold forecast. “The Gold market tends to look beyond headline inflation, to what the reaction of the central banks is going to be. Even though inflation has been rather low for the past couple of years, the Gold market went very strong, because it correctly identified that the central banks around the world are going to keep the spigot on. Even when inflation does begin to rise, if investors sensed there were going to be a steep ratcheting up in the interest rate, that would be the end of the bull market,” James Steel, chief Precious Metal analyst at HSBC, said.

The United States debt ceiling is dominating the financial news as of late, and for good reason. If the government does not find a way to avoid hitting the debt ceiling, the result could be disastrous. There are some financial experts who believe it could trigger a new recession in the country. Tim Phillips, president of Americans for Prosperity, says the focus should not be solely on the debt ceiling, but the amount of government spending. “We’re saying calibrate your message. Focus on overspending instead of long-term debt. Focusing on [the debt ceiling] makes the messaging more difficult.”

At 1 p.m. (EST), the APMEX Precious Metals spot prices were:

  • Gold, $1682.00, Down $4.00.
  • Silver, $31.52, Down $0.05.
  • Platinum, $1691.80, Up $1.90.
  • Palladium, $726.30, Up $11.90.

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The morning news is optimistic for the economy based on renewed growth figures from Europe.

The morning news is optimistic for the economy based on renewed growth figures from Europe. The see-saw effect of Europe’s ups and downs are reversing yesterdays drop and once again going up. Tuesday data is showing gross domestic product output for the region in line with expectations; Germany had modest growth while France had a flat performance.

Closer to home news is also positive as a report is out today showing that retail sales rose 0.8 percent last month. Economists had only expected a 0.3 percent rise. The report also tells us that the seasonally adjusted Producer Price Index is up 0.3 percent last month, higher by 0.1 percent than expected. Despite the higher prices, there was an increase in consumer spending during July. The core measure of retail sales which excludes autos, gasoline, and building materials rose a solid 0.9 percent.

One of the top consumers of gold in the world, India, is showing weak demand for the precious metal as prices for gold remain strong against their currency, the rupee. India’s festival season has begun and will peak in November. This is a time for weddings and giving gold as a gift.

At 9 a.m. (EDT), the APMEX Precious Metals prices were:

  • Gold, $1,597.70, Down $13.50.
  • Silver, $27.75, Down $0.13.
  • Platinum, $1,402.00, Up $8.20.
  • Palladium, $576.70, Down $0.50.

Closing Gold & Silver Market Report, 8/10/2012

CENTRAL BANK REACTIONS KEY TO SURVIVING  

The euro rebounded in afternoon trading today, which helped Gold, Silver, and many stocks to rebound from early losses, as well. China is now firmly in the mix as one of the global problems, said Sandy Lincoln of BMO Asset Management U.S. “It’s Europe, China, and the U.S. as the three big worries,” Lincoln said. How central banks react in this trying time is key to whether the global economy essentially makes it through to the other side. Miller Tabak’s Peter Boockvar said, “We’ve been talking about the tug of war for a while of the slowing global economy on the one hand, and central bankers trying to fight it tooth and nail on the other hand.”

Recent data from China, as mentioned previously, may be the jolt that central banks needed to spur them into more action for the economy. Jeffrey Sica of SICA Wealth Management said, “Gold is up mainly because of the weak manufacturing numbers in China, suggesting that there is a pretty strong indication we are going to see more quantitative easing there.” One potential setback to more easing is rising food prices, however. Sica believes that the Federal Reserve will be more concerned with keeping inflation in tow due to these rising prices.

At 5 p.m. (EDT), the APMEX Precious Metals spot prices were:

  • Gold, $1,621.00, Up $2.30.
  • Silver, $28.19, Down $0.02.
  • Platinum, $1,402.70, Down $11.10.
  • Palladium, $584.30, Down $4.00.