This week was completely haywire for precious metals.
Gold and silver went down and then bounced back on Wednesday. However, on Thursday gold and silver plunged down big time. On Thursday, the price of gold fell by 1.21% to $1,695.9; Silver price also plunged by 4.18% to $32.3. During the month, gold declined by 0.88%; silver, by 2.73%.
In the Indian markets, Gold fell Rs. 230 per 10 gram and silver fell by a whooping Rs.1700 per kg. It seems the recent FOMC decision didn’t help rally precious metals prices. On Wednesday, several U.S reports came out: retail sales rose by 0.3% during November; the PPI sharply fell by 0.8% last month; jobless claims declined again 29k to reach 343k. These reports suggest that the U.S economy is progressing and the inflation isn’t expanding.
The FOMC announced on Wednesday it will expand QE3 by start purchasing at the beginning of 2013 long term treasuries securities at a rate of $45 billion per month. This plan will substitute operation twist and will come in addition to the $40 billion mortgage backed securities purchase plan
However, the prices of gold and silver changed direction and plunged on Thursday despite the launch of the extended QE3. This drop in prices is an indication that many investors have cashed their investment in precious metals as these metals haven’t performed that well during the year 2012.Moreover, these investors might be waiting for the outcome of the budget talks in Congress and the consequences of the fiscal cliff.
Some bargain hunting had also occurred in gold after the metal fell below $1,700 an ounce overnight. The metal rose Wednesday on news of more Federal Reserve quantitative easing. But the inducement to lock in profits as we near year-end was strong, and therefore gold sold off.
Meanwhile, markets were knocked back further on fading hopes that euro bloc leaders would reach broad agreement on Friday to tackle the region's debt crisis after Germany rejected draft proposals that would increase the euro zone's firepower in dealing with the credit crisis. Germany rejected some measures in draft conclusions from the summit, including giving the European Stability Mechanism (ESM) a banking license and issuing common euro-zone debt.
As far as currencies were concerned, The Euro/ USD remained unchanged on Thursday at 1.3077. During the month, the Euro/USD rose by 0.7%. Several currencies such as Aussie dollar depreciated yesterday against the USD by 0.26%. The correlations among gold, silver Euro and Aussie have weakened in recent days: during November/December, Thus, if the Euro and other risk currencies will decline against the USD, they are likely to pull down gold and silver.
Now, as we move towards the end of 2012, all eyes await the ‘fiscal cliff’ decision. We hope 2013 will have lots of positive sentiments in basket as far as precious metals are concerned.
Last week we saw gold and silver going zigzag and then closing on a lower side by Friday. The prices of gold and silver changed direction and tumbled down on Tuesday and thus resume their downward trend from last week. The ongoing concerns regarding the fiscal cliff are likely to contribute to the volatility of precious metals in the weeks to follow. The prices of gold and silver continue to zigzag as both metals tumbled down. Other leading commodities prices such as crude oil and natural gas also fell on Wednesday.
Gold prices closed under $1,700 for the second consecutive day on the Comex division of the New York Mercantile Exchange Wednesday.
On Tuesday, the price of gold fell by 1.49% to $1,694.4; Silver price also tumbled down by 2.89% to $32.73. During the week, gold declined by 0.92%; silver, by 1.442%.
However the week opened with a positive note. Over the weekend, figures showed that Chinese exports in November increased by 2.9 percent to $179.4 billion, albeit hopes were for 9.6 percent growth in shipments. Imports were unchanged from the previous month at $159.8 billion.
Gold prices hit their highest for a week in Monday morning bullion trading in Europe, with the precious metals sector in a positive frame of mind ahead of this week's US FOMC meeting
The focus of the U S market place this week remained in the ‘fiscal cliff’ tax increases and spending cuts. This fast approaching ‘fiscal cliff’ is the most discussed issue worldwide as it will play an important role for all major markets.
U.S. lawmakers are still jawboning on the matter, with the market place paying less attention to the politicians’ rhetoric. While the market place presently perceives odds are higher than not that there will be a last-minute agreement among U.S. lawmakers to avoid the fiscal cliff, the overall situation has been a bearish drag on many markets, including the raw commodities and stock markets.
All eyes stay glued on the much awaited FOMC meeting of the Federal Reserve to be held next week on December 11 and 12. This will be the last meeting of 2012 and major topics of discussion include The “Operation Twist” program that comes to an end and the FOMC members have to take a decision on the extension of the bond buying program. There is a belief that the Fed will continue to purchase the US treasuries and launch ‘QE 4’ at this meeting. If this happens then precious metals market tends to remain bullish.
Asian stocks rallied on news that Chinese government officials have said they want to stimulate their economy by implementing more construction projects. Also, China’s purchasing managers index showed further expansion in November. This news is an underlying supportive factor for the metals markets.
Moreover, the upcoming reports including: U.S non-manufacturing PMI could moderately affect commodities markets. If the PMI will rise again it may pull up commodities prices. Australia’s employment report could affect not only the Aussie dollar but also precious metals prices. If this report will show the economy isn’t doing well, it could adversely Australia’s currency. This, in turn, could adversely affect precious metals. Finally, if the Euro and other “risk currencies” will rally against the USD, they are likely to pull up precious metals.
The Euro/ USD increased again on Tuesday by 0.31% to 1.3094. During the week, the Euro/USD rose by 0.83%.
The correlations among gold, Euro and Aussie are still strong even thought they have recently weakened: during November and December. Thus, if the Euro and other risk currencies will rise again against the USD, they are likely to pull up gold and silver.
