Gold softens as Economy Revs up

 

Here are the world’s top stories on the outlook for Gold and Silver prices and related economic indicators for the last week.

Enjoy,

Damion

Gold Slips below $1300 as US Economy Picks up

Closing price for June gold on Comex: $1293.90 and for May silver: $19.60. Spot prices at close on Thursday were $1295.60 and $19.75.

Gold prices fell sharply this week, erasing almost all their April gains as weekly jobless claims hit their lowest levels since 2007. News that manufacturing has strengthened in the Philadelphia region contributed to a drop in precious metals prices. With U.S. markets closed for the Easter holiday on April 18, the closing prices on both gold and silver showed a 1.9% drop for the shortened week.

QE (Quantitative Easing)

The Fed’s claims their third QE round is still on track to end this fall but this is highly unlikely according to economist Richard Duncan.

Federal Reserve

Janet Yellen gave her first major speech on monetary policy on Wednesday April 16, expressing a continued intention to keep interest rates low.  Analysts expect rates to stay near zero until at least the point next fall when the U.S. bond-buying program ends, and probably for some time after that.

Stock & Bond Market

The markets edged slightly higher on Thursday, in response to a batch of mostly positive quarterly earnings reports from several companies. CNBC reports that the U.S. economy is continuing to recover from recent disruptions caused by severe winter weather.

Gold & Silver Market

Gold reached the week’s low point  at $1,284.40 and the week’s low for silver was $19.22. As the market slipped below the 200-day moving average, analysts noted that the selloff triggered bearish technical chart signals.

Global Politics

On April 17 foreign ministers from Ukraine, Russia, the EU and the United States gathered in Geneva to begin talks on resolving the crisis in Ukraine.  Gold markets responded to this news with a price dropoff, and Andrey Kryuchenkov, strategist at VTB Capital in London, noted on Thursday that “further easing of tensions in Ukraine could weigh prices back to April lows.” A slowdown in Chinese demand for gold also caused some global investor concern.

Summary Opinion & Commentary

Overall, investor forecasts continue to be mixed. Jim Wyckoff commented this week that he is surprised to see a lack of risk aversion to the continuing Ukraine crisis. Although de-escalation talks have begun, he notes that the situation could still quickly turn into an international crisis and send safe haven investors to precious metals. He states: “The bearish technical posture that has gripped the gold market this week is presently trumping potential safe-haven buying on the Russia-Ukraine crisis.”

Ken Morrison, editor of online newsletter Morrison on the Markets  comments in Forbes that April 15 has been difficult for the gold market in the last few years, with 2013 prices dropping $140 on that day in 2013. The date this year didn’t see anything like that kind of volatility, but Morrison still feels that this year’s April 15 price “probably has put the nail in the coffin for gold’s upside potential”.

Kitco News Weekly Gold Survey  shows divided opinions, with seven respondents seeing prices rise and twelve expecting them to fall. Robin Bhar, head of metals research at Societe Generale, said he expects gold to slip next week: “I think the downward trend will continue into next week. I say that because the U.S. data clearly is on an upward trend,” he said. On the other hand, the long holiday weekend may create some short-term pent up demand; Afshin Nabavi, head of trading at trading house MKS (Switzerland) SA in Geneva and other analysts quoted by Kitco feel that if there’s a break of the $1280 price it could inspire some buying.