Recovery expectations for US banks increase volatility for precious metals
Ahead of the Federal Open Market Committee's decision, jitters spread across financial markets, reflecting on precious metals which managed to acquire some gains yesterday yet soon resumed today to their bearish trend. Despite of expectations for steady rates by the feds, yet investors are expecting a change in rhetoric and indications from the Feds on the coming monetary move. In our point of view, setting a specific date to exit current monetary policies and reversing them could be considered a far-fetched idea; however, traders are currently looking at the U.S. banking sector, where its financial system is resuming to stability.
The plan which swelled to $245 billion on funds provided to banks is expected to start being covered by almost $185 billion. This repayment to the government includes $45 billion from Citigroup and $20 billion from Wells Fargo. The news and expectations has made traders currently see the credit crisis almost coming to an end; thus, enabling European and U.S. stock indices to bullishly move yesterday, despite of the Nikkei's drop today on the back of the yen's appreciation which could hinder the economic recovery.
Precious metals advanced yesterday following the dollar's drop alongside crude's gains, encouraging investors into heading for metals in speculation and for fast gains. Nevertheless, despite the majority of speculative demand in the market, still some diverse investments are seen, yet slightly lower, especially on Gold, which was aroused on the bank of the Russian Central Bank's intention to increase their gold reserves by 5.0% starting next week!
Gold managed to appreciate throughout yesterday's trading session to close at $1126.40 per ounce, gaining 1.01%; silver followed to close at 17.39 rising by 1.52%; whereas platinum also spiked by 1.47% to close trades at 1448.00.
As seen, Silver was the metal with the most gains yesterday, while gold was the least to rise, insuring the power of speculation in the market as we mentioned above; we still see diverse demand and as we said on gold in particular, yet we can not understate the fact that stability across the global economy and emerging signs of improvement alongside a stronger dollar and subdued inflation has eased the headings to gold from investors and portfolio managers to gold as a hedge against instability that was seen.
Today, precious metals returned to their bearish trend, where as of 02:13 a.m. EST; gold fell by 0.25%, while silver depreciated by 1.04% and platinum followed and dropped by 0.35%.
Gold is trading at $1123.60 per ounce today, seeming less attractive alongside profit-taking that followed yesterday's rise; meanwhile, platinum also slightly fell to trade at $1443.00 per ounce today. Platinum still witnesses some demand from sides that view industrial sectors improving throughout the global economy, and therefore providing platinum some positive demand.
Silver, on the other hand, still faces volatile fluctuations, where speculations on the metal is seen in comparison to both platinum and gold, which makes profit-taking waves larger on other metals, which is the case incase we witness a bullish speculative wave on precious metal prices.
This year, gold is seen gaining more than 28%, whereas the dollar dropped by 6% against a basket of foreign currencies. Meanwhile, crude's rise this year is notable after plummeting below $40 per barrel; however, looking at commodity indices we see that they managed to record high levels this year. Yesterday, the S&P GSCI index rose by 2.61 points and closed at 491.93 in NY; whereas, the RJ/CRB index followed and gained by 2.66 to close yesterday at 273.52 points.
The gain that has been witnessed in the commodity indices futures, was encouraged by the dollar's drop and crude's gains, yet all in all the indices are still trading below their year's recorded highs. Despite of commodity indices plunging throughout this month's trades, they are presently trading near the highest levels this year, this further causes significant confliction among various expectations and reminding us in older statements and warnings from an expected major incline in foods and commodity prices after the global economic recovery; therefore, providing possibilities of rising inflation over the long term, this time caused by food and not just energies!