Weekly Gold & Silver Market Recap – 9/19/2014
Precious Metals suffered their third straight week of losses as strength in the U.S. dollar and an ongoing rally for the U.S. dollar weighed heavily on Gold and Silver. Gold will end the week at its lowest level in eight months while the Silver price plummeted below $18 an ounce leaving it at a four-year low. Much of the downward pressure that metals have experienced in recent weeks comes from speculation that the Federal Reserve will begin raising interest rates as earlier as the spring of 2015. With ongoing improvements in domestic labor markets, tightened monetary stimulus, equities reaching all-time highs and the U.S. dollar posting 10 consecutive weeks of gains, traders and investors are wondering what it will take to halt Gold’s freefall and reverse the bearish trend.
Precious Metals fell during morning trading on Friday as the U.S. dollar and equities markets continued their upward surge. “Money continues to move into equities, and there is more optimism about the U.S. economy,” Vision Financial Markets director of metal trading David Merger said. “The dollar continues to put pressure on Gold prices.” The Gold price continues to hover near an eight-month low as Silver fell to its lowest level in four years. The dollar realized its 10th straight week of gains as the ongoing pressure applied by the greenback continues to keep a metal rally at bay.
On Thursday, Gold prices looked like they were between a rock and a hard place. Both Gold and equity prices were expected to react negatively if the Federal Reserve statement indicated interest rates would rise sooner than expected. When Fed Chair Janet Yellen said rates would remain low for a “considerable time,” this should have been positive for Gold and equity markets. Equities are soaring, but Gold and Silver are taking a hit because the U.S. dollar shot up in reaction to stimulus packages announcements in China and the eurozone that will drive down the value of those currencies. Gold’s rebound could hinge on a sharp correction in the U.S. equity market, continued increased buying out of India and geopolitical tension escalation in Ukraine or the Gaza Strip.
Gold was mostly flat in early-morning trading ahead of a Federal Reserve decision at the conclusion of its policy meeting on Wednesday. VTB Capital analyst Andrey Kryuchenkov mentioned that regardless of the Fed’s likely attempts to talk down interest rate speculation, “The dollar is going to remain stronger against the euro and that is what really impacts the metal.” HSBC noted that the vote on Scottish independence could also impact the yellow metal. Their analysts wrote, “A yes vote is likely to be bullish for Gold and a no vote slightly bearish.”
