Weekly Gold & Silver Market Recap – 1/24/2014

GOLD REMAINS AT SIX-WEEK HIGH

Lower equities and a weaker U.S. dollar buoyed Precious Metals at the beginning of the week. Though gains were modest, Gold futures traded at their highest levels in almost six weeks. “I think the worst of the outflows is behind us,” Danny Laidler, head of ETF Securities’ Australia and New Zealand business, said. “A lot of our clients are still holding onto Gold as a risk-event hedge.” Gold bugs will continue to eye metals prices as Chinese demand ahead of the Lunar New Year, coupled with other economic factors, could continue to boost the yellow metal.

INVESTORS ANTICIPATE EARNING RESULTS FOR FOURTH QUARTER

The U.S. stock market closed Monday in observance of Martin Luther King, Jr. Day. However, it was expected investors would be focused Tuesday as earnings season continues and several Dow Jones Industrial companies were slated to announce fourth quarter results. Strong earnings reports were needed to boost stocks as poor industrial output and weak employment data have weighed on equities to start 2014.

PRECIOUS METALS PRESSURED FROM QE SPECULATION

Precious Metals prices headed downward through mid-day trading Tuesday, giving back gains earned at the end of last week. Speculation of continued quantitative easing (QE) tapering, a stronger U.S. dollar and a downbeat price forecast for Gold this year have weighed on Precious Metals. Mike Cullinane, head of Treasuries trading with D.A. Davidson in St. Petersburg, Florida, said, “The view out there is there’s going to be continued tapering on a gradual basis. Another $10 billion in tapering is a logical way to go.”

THREE RISKS POSED TO STOCK MARKET

MarketWatch’s Jeff Reeves wrote about three risks that could crash the stock market  in 2014, the first being disappointing jobs numbers. Reeves wrote that December’s disappointing report (released at the beginning of this month) was an outlier due to the bad weather, but “of course, the second option is that December’s jobs numbers weren’t a fluke… Friday, Feb. 7 [is] going to be a big day for the markets when January jobs data hits.” The second risk is bad earnings. “Profit margins have been at record highs for a while and haven’t cracked, so why would they this earnings season? Or the next? That’s the million-dollar question, and a huge risk to watch.” A lending drought is also a large concern for the markets. “If reports continue to show slowing lending in the U.S. and around the world, it could get painful for investors.”

PLATINUM REMAINS STRONG AS STRIKES BEGIN

Precious Metals prices fell slightly Wednesday as the U.S. dollar and equities strengthened over the course of the day, which encouraged some profit taking. Gold has already felt pressure this year as the U.S. economy continues to reflect growth and stability, along with concerns of further stimulus reduction measures. The next Federal Reserve policy meeting is set for January 28-29, and the market predicts that the Fed will announce its second round of tapering. Platinum, on the other hand, was the only metal with positive performance Wednesday, due mainly to Impala Platinum shutting down production at all of its South African operations a day ahead of planned strikes concerning wages.

EUROPE TO EXIT DEBT CRISIS SOON

Europe’s financial crisis has been a major concern for several years; however some economists suggest they may be exiting their fiscal issues soon. For instance, Switzerland appears to have escaped its recessionary bonds and may begin to show growth again. Sir Martin Sorrell, CEO at WPP Group and noted British businessman, said, “I think the answer is yes-ish. There are two Europes. There’s a Western Europe and there’s an Eastern Europe. I’m very bullish about Eastern Europe,” which includes Germany, Poland and Russia. German economist Axel Weber said, “Everyone expects the eurozone to grow, so that’s good. After several years of crisis, it’s quite normal to look on the bright side of things, to get excited about improvements. It may be too one-sided of a view.”

WEAK JOBLESS CLAIMS SUPPORTS GOLD

The Gold price overturned Wednesday’s losses on Thursday as a weaker U.S. dollar and a flat jobless claims report indicated economic growth is not as robust as predicted. Federal Reserve policymakers look to employment numbers as an overall gauge of domestic economic growth and use the data to determine the future of their quantitative easing (QE) program. This week’s downward revision of jobless claims projections marks the second week in a row that employment expectations were altered. As next week’s Federal Open Market Committee meeting approaches, jobs data will remain central to Fed officials’ decision to perpetuate QE or not.

GOLD PRODUCTION TO BE CUT IN 2014

As U.S. investors look to employment numbers, stock momentum and the Federal Reserve to gain insight into the future of Precious Metals prices, last year’s price drop has affected production of physical Gold. “The miners were mining at the highest possible cost because the Gold price was going up and when it stopped going up, they had to reduce that. So that means that they will mine less Gold,” Peter Hambro, chairman of Russian Gold mining company Petropavlovsk, said. With smaller scale mining operations closing up shop, larger firms like Petropavlovsk are cutting production back significantly this year. The diminished supply of physical Gold prompted Reuters to predict the yellow metal would be unable to slip much below current levels.

GOLD TRADING FLAT, STILL SET FOR FIFTH STRAIGHT WEEKLY GAIN

Precious Metals prices took a slight pullback Friday, though Gold was still poised for its fifth straight weekly gain. Even with today’s decline, an approaching Fed meeting and speculation that India will lower its import duty, many investors still have a positive outlook on Gold. Jeffrey Wright, managing director at H.C. Wainwright, said, “The existing pullback in equities markets has led to some ‘safe-haven’ buying, the potential for an increase in Gold imports to India if they lower the import duty, along with efforts in Europe to continue their own quantitative-easing policies are all supportive of Gold at the present time.”

 

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