Gold & Silver Report 16 March 2015

Precious metals were mostly hammered this week, seeing a three month lows due to a year-highs performing US dollar pushing continued expectations of a mid-year US interest rate hike. Gold steadied slightly by the end of the week, firming after its worst losing streak since 1973, as the US dollar nursed some losses and the market began awaiting next week’s US Fed committee meeting.

Price and charts snapshot:

Source: NASDAQ

On Monday Gold remained near a three-month low after the previous week’s U.S. jobs report boosted expectations that the Federal Reserve would raise interest rates soon.^[1] On Tuesday the U.S. dollar held near a 12 year high compared to the yen and euro, sending Gold near three-month lows and sustaining expectations over a US rate hike^[2]. On Gold’s fall continued, dropping another 1.1% to hit its lowest in over three months, as the US dollar and rate hike expectations remained robust. While Silver also fell by 2.2% to a three-month low. On Thursday struggled to overcome the losses from the last eight downward sessions.^[3] By Friday however the yellow metal firmed slightly above the US$1,150 mark as the US dollar nursed some losses, but still was set a weekly loss. Silver was also on track for a second straight weekly fall, down 0.3%.^[4]

Gold has continued to feel the heat from the strong US dollar this week. It began its recent decline since a stronger-than-expected U.S. jobs in the revious week rekindled speculation that the US Federal Reserve would raise interest rates soon. As Citi analyst David Wilson said “Data on [the previous week] was so significantly higher than expected that the market started to think that the Fed will have to start changing their language at the next meeting,”. On Friday of the week prior, the US Labor Department’s employment report showed that the U.S jobless rate had fallen to its lowest since May 2008.^[5]

The US Fed has kept interest rates near zero since December 2008, providing a platform for gold prices. As such, when the central bank started to signal tightening of monetary policy, the metal began to fall, as higher interest rates affect demand for non-interest paying assets such as gold.^[6] The anticipation of such a move has been reflected in the market, according to Mitsubishi Corp strategist Jonathan Butler: “What’s happening now is the pricing in of a mid-to-late-year rate hike. It’s hard to see, apart from physical demand re-emerging, any major upside catalyst.”, adding the “Ultimately support is at $1,130, which is around last year’s lows, but it’s hard to argue against the short-term downtrend established since the end of January”.

The next market focus will be on the US Fed’s next committee meeting on March 17-18.^[7][8]

Author Lisa Casagrande | https://www.goldbullionaustralia.com.au