Jewelers worried about the spike in precious metals

Metal prices declined during yesterday's trading after demand eased significantly with the recent rally in prices where investors are now concerned with the high prices especially the yellow metal which will negatively affect demand on jewels as this was highlighted clearly by businesses that experiencing waning demand during the past couple of days.

This decline in demand resulted in a profit-taking wave on precious metals taking gold from 1003.40 to 992.40 in New York whereas silver retreated from 16.73 to 16.30 dollars per ounce. Regarding Platinum, the metal slipped from 1306.00 to end trading at 1274.00 dollars per ounce.

The appreciation witnessed by the US Dollar yesterday was another factor that helped trigger the profit taking wave on metals while the rally in stock indicators encouraged the alteration of investments from commodities to stocks as the dip in prices were somewhat worrisome.

Hopes of a recovery in the US and global economy witnessed in the markets recently resulted in investors targeting other risky assets including various commodities and stocks. The S&P GSCI index added 2.83 points to end trading in New York at 457.16 points whereas we see crude oil was able to maintain the overall bullish trend.

Today, precious metals were able to rebound to the upside yet the incline was limited for gold compared to silver and platinum. Gold was trading at 995.40 as of 02:36 in New York as it was up 0.30% compared to silver advancing 1.23% and platinum inclining 0.71% to trade at 16.50 and 1283.00 respectively.

Silver and platinum are both considered to be investments that are directly related to the performance of the global economy and the industrial and manufacturing sectors which as a result have been the most volatile metals recently after the rapid inclines compared to gold which has been somewhat calm within a gradual uptrend that is interrupted from time to time by slight consolidation. However, as a safe asset, gold overcomes silver and platinum since the metal faces higher demand at times of distress.

We still believe that there still is a chance for gold and other metals to extend gains in the markets as the declines witnessed are nothing more than correctional movements that cause high volatility in the markets. With the incline in prices, investors tend to sell the metal to lock in profits and buy on dips which makes us expect the volatility in the markets to continue.

On the medium and long terms, the recent economic developments we have been discussing lately confirm the fact that metal prices, topped by gold, are to continue the bullish trend that may target historical highs as policy makers engage in quantitative easing accompanied by record low interest rates. Note that on the long run this may trigger higher inflation rates when the global economy recovers. Yet on the medium term, with slight uncertainty in the markets concerning when economy is to recover, gold will continue be seen as a safe asset across the globe.