Weekly Gold & Silver Market Report – 8/22/2014


UKRAINE TENSION EASES

Several factors were responsible for pushing Gold below $1,300 an ounce Monday, such as a stronger U.S. dollar and European and U.S. shares bouncing due to tensions easing in Ukraine. Gold has jumped nearly eight percent this year as investors have opted for the safe haven asset with concerns growing in Ukraine and the Middle East. For the first time in three weeks, hedge funds and money managers increased their bullish wagers on Gold futures and options, according to data released Friday by the Commodity Futures Trading Commission.

WORLD GOLD COUNCIL RELEASED GOLD DEMAND REPORT

Last week, the World Gold Council released its Gold Demand Trends report for the second quarter of 2014 showing Gold demand has returned to its long term trend, coming off highs achieved in 2013. Marcus Grubb, World Gold Council managing director of investment strategy, commented, “In the context of an exceptional year last year where we saw record consumer buying and investor sell-offs, this quarter’s demand continues to demonstrate a return to long-term trends, illustrating the uniquely balanced nature of the Gold market. Jewelry consumers continued to digest the exceptional purchases of 2013 and investors also rebalanced, pulling back from the extremes we saw last year. Overall the Gold market is stabilizing following the extraordinary conditions we saw in 2013.” Some key report findings include:

· Jewelry continues to represent more than 50 percent of the world’s Gold demand

· Central banks have increased their Gold purchases by 28 percent

· Exchange traded fund outflows are only one tenth of second quarter 2013

· Recycling is at its lowest since 2007

GOLD TRIMMED ON STOCK RALLY AS INVESTORS EYE JACKSON HOLE

Increased risk appetite weighed on Precious Metals and lifted stocks Tuesday as strong U.S. housing data influenced a temporary move away from Gold and Silver. The Gold price continued to hover around $1,300 an ounce as investors and traders alike mull over geopolitical tensions abroad and domestic economic data for signs of future market movement. Many investors awaited the outcome of the annual Federal Reserve meeting in Jackson Hole, WY, when central bankers from around the world gathered Thursday and Friday.  The event has historically ended with important policy announcements regarding the future of U.S. and world monetary policy.

FED MINUTES INDICATE RATE HIKE COULD BE SOONER THAN EXPECTED

The Gold price fell to a two-week low Wednesday as investors speculated whether an interest rate hike may come sooner than expected.  After the release of the minutes from the Federal Reserve’s July policy meeting, Gold came under pressure as non-interest earning assets like Precious Metals reacted negatively to the anticipation of a rate increase.  Continued improvements in the domestic economy are adding fuel to the argument that the Fed should end its stimulus program and begin raising interest rates. “The hawkish voices within the Fed have become louder,” Jerry Webman, chief economist at OppenheimerFunds Inc., said. “While the economic numbers are not very strong, they are definitely showing some strength.”

GOLD, SILVER PRICES CONTINUE TO SLIDE ON FED EXPECTATIONS

Gold and Silver prices fell sharply during trading Thursday, though the pace of decline slowed by the afternoon. The bad news for Gold is good news for stocks. The S&P 500 topped a record level Thursday morning. Expectations that the Fed will raise interest rates sooner than later as a result of good economic data are growing stronger. “The market is really in a sweet spot for U.S. stocks, fundamentals continue to be very good,” Jeff Kravetz, regional investment director at US Bank’s Private Client Reserve, said via phone.

U.S. JOB MARKET PROGRESSING

The labor market may not be where it needs to be, but jobless claims in the U.S. fell more than forecast last week. For the week ending August 16, jobless claims fell by 14,000 to 298,000. Bloomberg’s median forecast, which surveyed 46 economists called for 303,000 jobless claims. “The job market is doing well right now, there’s no doubt about it,” Guy Berger, an economist at RBS Securities Inc. in Stamford, CT, said. “There’s a good chance we’ll get another solid month of payrolls. Lower layoffs, together with faster hiring, mean better prospects for consumer spending.”

RUSSIA BUYS $400 MILLION IN GOLD TO BOOST RESERVES

Russia announced they added 9.4 tons of Gold valued at $400 million to its Gold reserves. This is the fourth consecutive month that Russia has expanded their Gold holdings. Russia now holds 1,104 tons, which moves them ahead of China to fifth in the world (China has not reported their Gold holdings since 2009, but Russia has moved past what was last reported). “Russia has been the largest official buyer for years,” Eugen Weinberg, head of commodities research at Commerzbank in Frankfurt, said Thursday. “It’s a part of its long-term strategy of amassing gold reserves and diversifying its foreign exchange reserves.” According to the World Gold Council, central banks have continued to be purchasers of Gold and have been net purchasers since third quarter 2009. Central banks purchased 409 tons of Gold in 2013 and they are expected to add as much as 500 tons in 2014.

METALS PRICES CLIMB AS THE WEEK COMES TO AN END

Gold and Silver prices climbed steadily Friday, largely on news coming out of Ukraine.  NATO Secretary General Anders Fogh Rasmussen said Friday there has been an alarming buildup of Russian forces near Ukraine, saying, ‘We have also seen transfers of large quantities of advanced weapons, including tanks, armored personnel carriers and artillery to separatist groups in eastern Ukraine.” He also condemned Russia’s move sending “a so-called humanitarian convoy” without acknowledgment from Ukraine or supervision of the International Committee of the Red Cross.