Bernanke stops Metals from Collapsing!
Precious metals traded on lows yesterday again, at a time where investors rushed to buy the dollar after the Friday's jobs report. Trades dollar rush was amid expectations that the feds might raise their benchmark interest rate sooner than anticipated, especially after the major improvement witnessed in the jobs market. However, this might affect yields and fuel attraction towards the U.S. treasuries.
Bernanke said yesterday that the U.S. economy faces formidable headwinds; despite of the U.S. jobs data in November reflected improvement, Bernanke's signal was obvious towards the truth that the consumers are still cautious when it comes to spending, where unemployment levels remain high.
In addition to that, he emphasized that inflation expectations remain anchored as inflation remains subdued; thus, reversing earlier expectations in the session that the Feds maybe hiking rates sooner than expected as the economic recovery gathers pace. We think that Friday's data cannot prove that the U.S. economy and jobs market have stabilized; instead, we need to see consistent data that jolts together to assure real economic stability in the world's largest economy and not base our outlook projections on one month's improvement.
After the continued freefall precious metals witnessed yesterday, they resumed strongly to limit their losses and head to the upside. Gold, however, managed to drop yesterday and record its lowest at 1137.10 from highs of 1165.80, but managed to appreciate after witnessing demand on lows and close at 1157.60 down by only 0.33%. Silver, on the other hand, rose from its lowest at 17.88 to close at $18.17 per ounce; whereas platinum was able to compensate for its losses in New York to close at 1439.00.
It seems that Bernanke managed to save precious metals from plummeting even further! Gold closed at 1142.50 in London, near its lowest levels recorded; while silver closed at 18.04; platinum, however, remained low at $1430.00 per ounce. Meanwhile, the slight drop the dollar witnessed was behind the slight gain precious metals had made.
By looking closer at commodity indices' trading yesterday, the S&P HSCI index fell by 3.32 points to close at 500.00, where this drop was driven by the depreciating energy components amid expectations of demand to remain weak in the U.S. As for the RJ/CRB index, it was able to rise towards 274.18 gaining by 0.31 points, where precious metals slightly helped support the index.
Today, gold rose for the first time in three days, as of 02:46 EST, recording gains by $1.8 and trading at 1159.40; platinum also rose by $11 and is currently trading at $1450.00 per ounce. Meanwhile, silver also appreciated in the Asian session, but at the same time returned to trade lower currently trade at $18.13 per ounce; however, overall precious metal prices remain stable to some extent.
In addition, the most important markets in Asia, declined after warnings from Bernanke yesterday of the prevailing pressure on the U.S. economy. Meanwhile, U.S. stocks closed neutral despite positively trading ahead of Bernanke's signs; presently, we see European markets trading with some negativity. Stocks effect helped precious metals today, but at the same time pressuring crude lower and therefore limiting the appreciation for metals in suppression of inflation haven.
The situation looks complicated; expectations show that low inflation is going to rise over the long term, whereas the low interest rates in the U.S. and the fact that the economy continues to weaken, despite of the gradual improvement; however, this improvement does not include all sectors at the same level.
Furthermore, the credit crisis is still live and ticking but its effects have withered down on the banking sectors yet did not disappear; thus, forming a mixture that is hard to predict its outcome, which keeps pressure on precious metals over intraday and short basis and increasing the volatility and the downside movement.
Nevertheless, the medium term outlook which could extend into the first-quarter of next year, expectations are still intact for further metal gains, specifically gold, and more record breaking highs. Those are the expectations of many analysts and investors around the world, alongside many economic facts that continue to support the dollar's bearish outlook!