Gold & Silver News – 27th Oct 2014

Gold dropped but then saw some recovery from a low point this week as the US dollar declined on the back of news of ebola in New York and Eurozone concerns.

Gold and silver prices

Gold and Silver Weekly charts:

Source: NASDAQ

Gold began the week on a higher note after last week’s overall increase. By Tuesday prices briefly enjoyed hitting a six-week high in early US trading, due to safe-haven demand and bargain hunting.

However on Wednesday Gold futures lost ground due to sentiment that the European Central Bank may undertake further measures to loosen monetary policy, a report on Forbes showed. Holdings of the world’s largest gold-backed fund, SPDR Gold Trust, also fell, dropping to 749.87 tonnes; the lowest since late 2008^[1].

On Thursday, Gold fell a further 1%, seeing demand dropping over stronger-than-expected economic data and upbeat corporate results boosting the global equity markets; while the US dollar was batting near a one-week high

By Friday there was a slight turnaround in the market, when the dollar dropped for the first time in four days as an Ebola diagnosis in New York was reported. Concerns also persisted over the health of the eurozone, with reports agency Efe indicating eleven banks from six eurozone countries are likely to fail stress tests^[2].

By the end of the week, Gold futures for December delivery added 0.2%, settling at US$1,231.80 (AUD$1400.63) an ounce on the New York Comex, down 0.6% for the week. Meanwhile, Silver futures for delivery in December rose 0.1% to USD$17.182 (AUD$19.54) an ounce.

Reflecting on the week’s movements, Bloomberg reiterated that rising rates reduce the metal’s allure because the commodity generally only offers returns through price gains. Other discussions such as by Barclays Capital economists added that a strong dollar and the direction of China’s economy are also influential factors. Tom Power, a senior market strategist at RJO Futures in Chicago, said that “long-term price direction will be all about what the Fed does next”: fed policy makers are scheduled to meet October 28-29th.

In the Kitco Gold Survey, 21 participants responded with six predicting higher prices, nine seeing lower prices and six seeing sideways prices in the week ahead. Phillip Streible, senior market strategist at RJO Futures said that next week support will begin at USD$1,220 (AUD$1387.21) and resistance at USD$1,250 (AUD$1421.33)^[3].

The upcoming Swiss referendum is coming up next month on November 30th. According to Forbes, votes for yes or ‘leaning towards’ yes measured at 53%. The proposal would require the Swiss National Bank to hold 20% of its reserves in gold. Since 2006, Swiss gold reserves have fallen from 29% to 7.8%, therefore a “yes” vote would result in the Swiss National Bank being required to buy more gold, or sell off money reserves.