Woes rise over falling consumer demand on precious metals
The surge in precious metals’, specifically gold, increased investors’ worries about declining demand on precious metals including demand on jewelry. This could ease the bullish momentum witnessed by precious metals throughout the prior period. Gold gained by the end of New York trading yesterday by 0.74% to close at $1056.70 per ounce; whereas, silver rose by 0.11% to close at 17.72; platinum however, closed at 1335.00 with slim gains of 0.15%.
Comparing the rise seen for precious metals, gold managed to increase the most; whereas metals are affected the most by consumer and industrial demand, which had risen but at a slightly lower pace than gold. This could mean that demand on gold was due to fears as a hedge uncertainty over the global economic outlook, despite emerging signs of stability and near exit of the recession.
On the other hand, the comparison we mentioned among the difference between the rise set by the three precious metals, shows us that consumption demand could have drastically dropped from the precious metal's overall high prices and thus causing traders to be more jittery towards the idea of the metals continuing their upside trend.
Yesterday, the dollar plunged while crude oil gained, where these reasons managed to push precious metals to the upside. Meanwhile, commodity indices in New York inclined; where the S&P GSCI index ascended to its highest this year at 483.71; whereas, RJ/CRB COMMODITY Index closed at 267.14 points.
Rising commodity indices alongside crude's rise are forcing expectations for a major rise in inflation over the long run, even though current inflationary levels seem to be at their lowest. However, the drop in interest rates alongside unorthodox central bank policies and government stimulus measures, increased liquidity in markets right now, where as soon as the economies stabilize they will witness a surge in prices including high volatility in inflation. Meanwhile, earnings released by major companies around the world were better than expected, giving us a reason to think that the global economy has indeed exited the worst recession since World War II, and is on its way to growth and stability.
Since we are currently witnessing economic improvement and stability, we can't help but to also realize that inflation could surge over the long term; for that demand on precious metals as a safe haven to offset the effects of falling purchasing power that is predicted to occur in the upcoming period. At the same time, we see that the current economic conditions are causing each individuals purchasing power to decline, although the overall purchasing power is rising, this too is encouraging precious metal purchasing to protect it against risks of unemployment rate rises that have reached 9.8% in the U.S. and 9.6% in Europe, also effecting numerous countries around the world.
The previously mentioned reasons support our expectations that the overall long and medium term trends for precious metals is bullish; meanwhile, over intraday and short term basis worries are merely on falling consumer and industrial demand; where if the metal's price surges it could cause back to back profit-taking waves every once in a while.
Precious metal's trading in the Asian session today was sideways; gold is trading at 1055.00 as of 02:22 EST; silver is trading at 17.78; whereas platinum is trading at 1344.00. We see that the metals were fluctuating and trading within a very narrow range throughout the Asian session. Meanwhile, U.S. stocks yesterday seemed very mixed, where a profit-taking wave and a drop occurred before closing; whereas Japan and Hong Kong’s trading was positive today. We await U.S corporate earnings which is keeping investors edgy yet optimistic even though expectations are upbeat. However, the rise in stock indices point to the continuing improvement throughout the global economy, thus supporting the constant incline in demand on precious metals, but at the same time worrying about the decline in demand while prices rise, could limit the surge in precious metals.