The precious metals have experienced a roller-coaster ride encompassing huge volatile swings and technical breakouts. The volatility has remained high however, the volume is decreasing as many Gold bugs have packed it in for the year. The economic news for the week has favored the U.S Dollar and boosting it to three month high’s. Despite the FOMC decision to keep U.S Interest rates unchanged there was a “hint” regarding a possible rate hike in the near future. This news coupled with Standard & Poor’s decision to downgrade Greece’s credit rating due to its deficit situation sent investors scrambleing to buy the U.S Dollar. This reaction caused an inverse reaction to the precious metals and causing another volatile sell-off causing the February (GLOBEX) market to dip below the $1100.00 level. Research tells me the jewelers of India have expressed huge interest in buying Gold at the $1100.00 and below to fill their demand for the ongoing “Wedding Season” ornamentation.
China is expected to produce over 300 metric tons of Gold again this year. They announced recently that it wants to build up its Gold reserves to 10,000 tons over the next decade. This should be attainable especially when you consider they are the world’s largest Gold producer and they are not exporting any!
As the price of Gold continues to fall it offers an opportunity (in my opinion) for investors to invest in physical Gold and silver to diversify against possible inflationary periods ahead. The drop in price certainly has become an answer to the many “Brides to be” in India’s prayers. Their culture appreciates the “BIGGER IS BETTER’ philosophy when purchasing Gold jewelry and ornamentation during their Festival and wedding seasons.
Since December 4th and the positive unemployment numbers….(taking the unemployment rate from 10.2% down to 10.0%) the Gold market has dropped over $ 130.00 in a much needed correction. There was no doubt the Gold and Silver markets were both technically over-bought. The market was running on fumes as it was trading around the $1220.00 level. There was no momentum and as seasoned Gold trader I realize markets rarely rally when everyone is long. The Silver market has enjoyed the success of Gold during this year long rally and certainly has out performed Gold on the year thanks to its duo metal status..(precious metal /industrial metal).
The December Gold has rallied from a low of $810.00 on 1/15 to a high of $1226.40 on 12/03
The December Silver has rallied from $10.39 on 1/15 to a high of $19.43 on 12/02….
This year long rally was primarily due to the weakness and inability of the U.S Dollar to maintain
any momentum. This recent correction from December 4th is due to the stellar strength of the Dollar.
As a Gold trader you must ask the question….Can the U.S Dollar maintain this momentum?
Give me a call…lets talk Gold …..
Mike Daly / Gold Specialist