Weekly Gold & Silver Market Recap – 6/21/2013

PRECIOUS METALS REACT TO FED ANNOUNCEMENT

This week’s financial news revolved around the Federal Open Market Committee (FOMC) meeting and the future of their monetary easing program. On Monday, while the stock market and U.S. dollar indexes rose in anticipation of the FOMC meeting, Gold headed the other way. The Gold price closed last week on a higher note on strong bullion demand, a drop in the U.S. stock market and rising tension in the Middle East. Monday, investors were once again considering the actions the U.S. Federal Reserve may take.  Any easing of bond-buying programs, raising the prospect of future rate tightening, is seen as unfavorable for Gold.  Rising rates also raise the opportunity cost for holding a Precious Metal that has no interest rate. The  Gold price was down again Tuesday as anticipation built  for the announcement of a possible decline in monetary stimulus. The $85 billion in monthly mortgage backed securities and treasury debt have been perpetuated by the Fed to boost a lagging U.S. economy. Both Precious Metals and stocks have benefited greatly but the fundamental emphasis set forth by the Fed was to reach a specific reduction in domestic unemployment. A division exists between analysts who believe tapering is necessary and others who consider the discussion to be premature. Precious Metals have been trading in a tight range without any motivating factors to break out of current levels. On Wednesday afternoon, Precious Metals prices began to fall after  Fed Chairman Ben Bernanke announced the probability of reducing asset purchasing by the end of 2013 and completely ending it in 2014. Bernanke made it clear, however, that how the economy performs will determine how the Fed will proceed, stating, “If you draw the conclusion that I've just said that our purchases will end in the middle of next year, you've drawn the wrong conclusion, because our purchases are tied to what happens in the economy.” The market is still in limbo as investors are aware of the Fed’s fiscal plans, but they’re not certain of the exact timeframe. “We pretty much have a Fed statement and summary of economic projections that leave us believing what we believed yesterday, which is the Fed is going to taper at some point, maybe at the end of this year, maybe in 2014," Lazard Capital Markets’ managing director Art Hogan said. After Bernanke hinted at the end of their monetary easing policy Wednesday, the Precious Metals market started moving downward and didn’t stopped Thursday.  However, the U.S. stimulus policy is not the only issue weighing on the price of Precious Metals.  " We're seeing a stronger U.S. dollar, real rates are looking quite strong, inflation is very low and U.S. 10-year yields are at 2.4 percent. In that environment, Gold is going to suffer,” Deutsche Bank analyst Daniel Brebner said. The Gold price recovered some ground in overnight trading Thursday after hitting near three-year lows. After the U.S. stock market opened Friday, the Precious Metal has remained mostly flat, inching its way into positive territory. At this rate, when the day is over,  Gold will have stayed on track for its biggest weekly drop in almost two years  and the Fed’s announcement is mostly to blame. Quantitative easing (QE) has weakened the U.S. dollar, making it more advantageous to own Gold. Physical buying in India was slow despite Thursday’s price drop, while demand in China was higher.

ALL MARKETS FELT THE FED’S EFFECTS

While the Gold price was moving lower, the equities market started in the opposite direction. Following a week that saw equities drop more than 1 percent,  stocks were gaining abruptly Monday  ahead of expectations for the outcome of this week’s FOMC meeting. Over the last few years, investors and traders alike remain intently focused each time Fed Chairman Ben Bernanke is set to discuss the Fed’s assessment of the economy and its strategy going forward. Regarding this week’s Fed meeting, Daiwa Capital Markets’s Chris Scicluna wrote, “While policy is obviously widely expected to be left unchanged at this meeting, all eyes will turn to the post-meeting press conference where Bernanke will unveil the Fed's latest economic projections — relevant for the timing of the first rate hike — and hopefully provide greater clarity on the likely time frame for tapering asset purchases.” On Tuesday the trend of positive equities continued and Hugh Johnson of Hugh Johnson Advisors believed that stocks were rallying “in anticipation that [U.S. Federal Reserve Chairman Ben] Bernanke is not going to taper soon. If he does what we think, the market is going to give up some ground, because what he is going to say is going to be fully priced into the market. When you anticipate good news, you buy stocks when you finally get the good news, you sell.”  Johnson was dead on because after the Fed announcement, the equities market headed lower around the world.  Equity, bond and commodity markets sold off in Europe and Asia in overnight trading, taking up where the U.S. stock market left off. Japan’s Nikkei stock index fell 1.7 percent and all European markets traded at least 1 percent lower. Germany and France were hit the hardest they are also the strongest European economies.  Bank of Singapore chief economist Richard Jerram said on CNBC, “Markets are not trying to rationally judge what the real impact of a tapering of QE is likely to be.” The global fear of what will happen when the Fed begins to unwind the QE program played into Thursday’s reaction. U.S. stocks fell more than 2 percent by day’s end, major markets in Europe dropped more than 3 percent and Chinese markets dipped approximately 2 percent. Meanwhile, interest rates increased to their highest point in two years, and the U.S. dollar rose as well.

At 4:46 p.m. (EDT), the APMEX Precious Metals spot prices were:

• Gold, $1297.10, Up $8.90.
• Silver, $20.15, Up $0.21.

Morning Gold & Silver Market Report – 6/21/2013

GOLD BEGINS LONG ROAD TO RECOVERY

The Gold price is slowly rising this morning as it attempts to recover some of yesterday’s losses. One factor contributing to the severity of the price drop was news  that CME Group Inc. was raising margin requirements  for the metal at the end of the week. This caused many traders to liquidate their positions. GFT Markets technical analyst Fawad Razaqzada said, “The next stop [for Gold] is probably $1,275/85 [based on technical indicators]. Beyond this area, there is nothing significant until $1,200. On the upside, $1,350 is likely to turn into resistance, having provided support before.”

The U.S. Federal Reserve’s signal yesterday that it could start tapering its quantitative easing program by the end of the year caused stocks around the globe to fall as well. One stock trader said, “Even defensive sectors are getting smoked. The super broad-based sell off between commodities, bonds, equities — I wouldn't say it's panic, but we've seen aggressive selling on the lows.” The panic is one reason St. Louis Fed President James Bullard defended his dissenting vote from the Fed’s policy statement. Bullard believes  the Fed should have waited for “more tangible signs” of a better economy, and was concerned that the U.S. Central Bank was following the calendar more than the data.

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

• Gold, $1,294.90, Up $6.70.
• Silver, $19.98, Up $0.04.

Gold Finally Cracks 2011 Low Lots of ‘Stuff’ at from 1220 to 1250

Weekly

Chart  Prepared by Jamie Saettele, CMT

Commodity  Analysis: Wrote yesterday that “after being ‘too quiet’, gold is making a move…the move is lower. Price closed below the line that extends off of the April and May lows today. An extension of the 1321-1488 range yields a target of 1155, which is in line with the July 2010 low of 1157.” Keep the extended target of 1155 in mind but also recognize the potential for something to materialize from between 1220 and 1250 (several measurements, the June 2010 high and November 2009 high).

Commodity Trading Strategy: Flat

LEVELS: 1156 1220/27 1250/65 1301 1308 1316

Closing Gold & Silver Market Report – 6/20/2013

• Gold, $1,281.70, Down $94.30.
• Silver, $19.72, Down $2.02.

Morning Gold & Silver Market Report – 6/20/2013

GOLD TUMBLES TO 2 1/2 YEAR LOWS

The Gold price fell sharply in overnight trading, spurred on by the U.S. Federal Reserve indicating they would begin tapering their monetary stimulus later this year. Losses for the Precious Metal continued during European trading, even dropping below $1,300 an ounce.  Sharps Pixley director Austin Kiddle said, “Calling a bottom would be like trying to catch a knife.” He continued to say that Gold should consolidate next week and that July could possibly see a turnaround.

The Gold price wasn’t the only thing to suffer. Equity, bond and commodity markets sold off in Europe and Asia in overnight trading, taking up where the U.S. stock market left off. Japan’s Nikkei stock index fell 1.7 percent and all European markets traded at least 1 percent lower. Germany and France were hit the hardest they are also the strongest European economies.  Bank of Singapore chief economist Richard Jerram said on CNBC, “Markets are not trying to rationally judge what the real impact of a tapering of QE [quantitative easing] is likely to be.” The global fear of what will happen when the Fed begins to unwind the QE program played into yesterday’s reaction.

At 9:27 a.m. (EDT), the APMEX Precious Metals spot prices were:

• Gold, $1295.30, Down $80.80.
• Silver, $19.89, Down $1.86.

LONDON (June 20) Gold prices tumbled to their lowest in more than 2-1/2 years on Thursday, and silver fell more than 6 percent after the U.S. Federal Reserve gave its most explicit signal yet that it plans to bring the era of easy money to an end.

Gold plunged after Fed Chairman Ben Bernanke said on Wednesday the U.S. economy was expanding strongly enough for the central bank to begin slowing the pace of its bond-buying stimulus later this year.

Its fall picked up momentum after it broke through its April low at $1,321 an ounce, a key support level, taking it as low as $1,295.74 an ounce, its weakest since September 2010.

Spot gold was down 4 percent at $1,298.29 an ounce at 0939 GMT, while U.S. gold futures for August delivery were down $74.00 an ounce at $1,300.00.

" Ben Bernanke was certainly indicating an end to quantitative easing, and that's what the market is reacting to," Deutsche Bank analyst Daniel Brebner said.

" We're seeing a stronger U.S. dollar, real rates are looking quite strong, inflation is very low and U.S. 10-year yields are at 2.4 percent. In that environment, gold is going to suffer."

Bonds, shares and commodities fell sharply around the world on Thursday and the dollar rose after Bernanke's comments.

The ultra-loose monetary policy brought in by the Fed to boost U.S. growth, which kept interest rates at rock bottom levels while stoking concerns about inflation, was a major factor fuelling a more than decade-long bull run in gold that took prices to record highs in September 2011.

Indications that the policy was nearing an end have helped push prices down more than 20 percent this year after 12 straight years of gains.

Waning investment interest in gold has been signalled by heavy redemptions from gold-backed exchange-traded funds, whose holdings are down more than 350 tonnes so far this year.

SILVER TUMBLES

Swiss bank UBS early on Thursday cut its gold price forecasts for the next three years to $1,440 from $1,600 for this year, to $1,325 from $1,625 in 2014 and to $1,200 from $1,500 in 2015, citing the Fed's move.

" This creates an increasingly difficult environment for gold," it said. " Slowing Fed asset purchases, with the end now potentially in sight, higher yields, a stronger dollar and continued improvements in the economy are significant obstacles that perpetuate an already very weak investor sentiment."

Silver was the biggest faller among the precious metals, sliding more than 6 percent to a session low at $19.90 an ounce, its weakest since September 2010. The metal was later down 5.8 percent at $20.13 an ounce.

Silver prices are now down by nearly a third this year. The gold/silver ratio, which measures the number of silver ounces needed to buy an ounce of gold, rose to its highest since August 2010 on Thursday at 64.41 as silver underperformed. 

Gold Below 1365 isn’t Troubling for Bulls

Weekly

Chart  Prepared by Jamie Saettele, CMT 

Commodity  Analysis: After being ‘too quiet’, gold is making a move. Recent comments were that “failure to hold 1367 on a daily closing basis would be worrisome. We should have an idea regarding the next move soon.” It seems that the move is lower. Price also closed below the line that extends off of the April and May lows today. An extension of the 1321-1488 range yields a target of 1155, which is in line with the July 2010 low of 1157.

Commodity Trading Strategy: Flat

LEVELS: 1277 1307 1321 1361 1376 1395

Closing Gold & Silver Market Report – 6/19/2013

METALS DIP ON FED REPORT RON PAUL EVALUATES GOLD

Precious Metals prices began to fall today after  U.S. Federal Reserve Chairman Ben Bernanke announced the probability of reducing asset purchasing by the end of 2013 and completely ending it in 2014. Bernanke made it clear, however, that how the economy performs will determine how the Fed will proceed, stating, “If you draw the conclusion that I've just said that our purchases will end in the middle of next year, you've drawn the wrong conclusion, because our purchases are tied to what happens in the economy.” The market is still in limbo as investors are aware of the Fed’s fiscal plans, but they’re not certain of the exact timeframe. “We pretty much have a Fed statement and summary of economic projections that leave us believing what we believed yesterday, which is the Fed is going to taper at some point, maybe at the end of this year, maybe in 2014," Lazard Capital Markets’ managing director Art Hogan said.

As quantitative easing has become the norm for the U.S., investors have concluded that the dollar will continue to devalue as more is printed and pushed into the economy. When the dollar becomes less valuable, more is required to purchase an ounce of Gold. Former congressman and presidential candidate Ron Paul has a confident forecast for Gold, saying, “as long as we have excessive spending, and excessive computerized money, we are going to see Gold go up." He added, " Six thousand years of history shows that Gold always retains value and paper always self-destructs."

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

• Gold, $1,352.50, Down $16.40.
• Silver, $21.45, Down $0.35.

Morning Gold & Silver Market Report – 6/19/2013

GOLD STARTS DAY MOVING UP 

As the markets open this morning, the Gold price is up slightly. The markets have been waiting for the United States Federal Reserve to speak on the future of their monetary easing program and today the wait is over.  There has been much speculation on what will be said by Fed Chairman Ben Bernanke and when it is announced the markets will take notice.  “Any signs of improvement in growth expectations will further fuel uncertainty about the Fed’s asset purchase program,” Mumbai-based Kotak Commodity Services Ltd. said today in a report. “Any sign of curtailment in asset purchases will be negative for Gold, however it has been factored in to some extent.”

Many economists believe today’s Fed announcement is being over hyped and will fall short of expectations. Their reasoning is that the economy has improved but not as much as is needed to start tapering the easing program.  As with past announcements, it is believed the Fed will continue to monitor the situation and act accordingly.  " Should the outlook improve as the Fed expects, then it may continue to lay the groundwork for a tapering of purchases at upcoming [Federal Open Market Committee] meetings. However, should the data evolve more in line with our forecast, then we see the Fed as refraining from tapering until the first quarter of 2014," Michael Gapen, an economist with Barclays in New York, said.

At 9:02 am (EDT), the APMEX precious metals spot prices were:

• Gold, $1373.40, Up $4.50.
• Silver, $21.76, Down $0.04.

Gold Nears Range Lows

Weekly

Chart  Prepared by Jamie Saettele, CMT

Commodity  Analysis: Near term, watch for resistance from the ‘meridian’ line that has proved important on numerous occasions. The line is at about 1435 this week. 1367 is still estimated support (low last week was 1365 and close today was 1367). Failure to hold that level on a daily closing basis would be worrisome. We should have an idea regarding the next move soon.

Commodity Trading Strategy: Flat

LEVELS: 1307 1321 1367 1395 1413 1423

Closing Gold & Silver Market Report – 6/18/2013

• Gold, $1,369.60, Down $15.50.
• Silver, $21.72, Down $0.16.

Morning Gold & Silver Market Report

• Gold, $1376.40, Down $8.70.
• Silver, $21.90, Up $0.02.

Closing Gold & Silver Market Report – 6/17/2013

• Gold, $1,386.00, Down $3.60.
• Silver, $21.88, Down $0.19.

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