Posted on January 12, 2016
Gold Spot Price Open: $1,101
Gold Spot Price Close: $1,087
Change in Gold Spot Price: -$14
Silver Spot Price Open: $14.05
Silver Spot Price Close: $13.86
Change in Silver Spot Price: -$0.19
Precious metals backed down yet again on Tuesday as investors are showing a marked increase in risk appetite. When all was said and done, gold declined by another fourteen dollars while silver fell by just shy of 20 cents. Platinum and palladium also fell on the day, by little more than 5 dollars apiece.
Unlike last week, where geopolitical concerns gripped the marketplace, this week is seeing investors grow a bit more confident in the global economy. For a second consecutive day, stock markets across the globe traded without any massive declines, and last week’s geopolitical concerns drifted further into the background. The US Dollar ventured forward against rivals today even despite crude oil prices that fell to a near 12 year low. Now at under $31/barrel, investors are seeing crude oil trade at the lowest point since 2004. This is not good for gold and silver and will more than likely continue to bode poorly for precious metals so long as oil cannot gain any sort of foothold.
The Chinese economy is still faring poorly, but there is a growing sense that investors are beginning to factor in Chinese weakness and that it may not continue to have such a drastic impact on the global economy. This isn’t certain, but so long as everyone expects China to grow at an incredibly slow rate throughout 2016, they will continue making investment decisions based on this presumption. In addition, continued Chinese weakness will more than likely continue to keep crude oil prices subdued like they have been for the past few months.
Chinese car sales were released this week, and it showed that Chinese citizens are not eager to get their hands on a new set of wheels. In fact, China’s car sales in 2015 rose by just shy of 5%, marking the slowest rate of growth since 2012. This is news for palladium because cars’ catalytic converters contain the metal, and with car sales slumping so too will demand for the automotive metal.
Palladium is now trading near a 5-year low and, like gold, is going to have a tough time gaining any real, solid footing anytime soon. The fact of the matter is that without a resurgence on the part of the Chinese economy, it is going to be very difficult for many raw materials to gain value. Whether it be palladium, oil, or any other type of industrial product, a slumping Chinese economy only means bad news.
Hurting palladium even further is the exact same thing that is hurting crude oil. There is too much of the metal available right now without the demand to purchase it. Because of this, the price of the metal will continue to be driven down. As we move forward further into 2016, I imagine that the focus of investors will continue to be placed directly on the Chinese economy and what it means for the rest of the world. For now, the prospects are bleak as it relates to gold and silver, but anything can happen in the coming weeks and months to change this.
The marketplace was somewhat quiet on Tuesday, but that did not stop precious metals from moving downward straight from the beginning of the day. As we look forward to the rest of the week, I am certain that we will continue to focus on China and its many complexities. Apart from that, there isn’t many big stories to look forward to other than the progress of crude oil.