Posted on July 22, 2014
Gold Spot Price Open: $1,313
Gold Spot Price Close: $1,308
Change in Gold Spot Price: -$5
Silver Spot Price Open: $21.01
Silver Spot Price Close: $21.02
Change in Silver Spot Price: +$0.01
With the exception of silver’s negligible gains, today saw precious metals trade downward across the board. When all was said and done, gold lost about 5 dollars while silver was able to add a penny or two, ending the day above $21/ounce. Platinum and palladium both recorded minor losses today as well.
For a majority of the month of July thus far, the US Dollar has trended higher against a number of rival currencies. With talks of tightening monetary policy abounding in the United States, the current economic atmosphere is perfect for a stronger US Dollar. Helping the greenback further is the fact that the EU has been pursuing extremely loose monetary policy. As the EU continues instituting more stimulus measures, the strength of the euro currency will continue to diminish.
In a phone interview with Bloomberg today, Lennon Sweeting of US Forex Inc. agreed that current EU monetary policy is supportive of a stronger US Dollar when he said, “The ECB policy supports a weaker currency, so therefore I would expect euro will continue this pace of moving lower. Toward year-end we should be settling in somewhere around $1.30, and a more aggressive forecast maybe even $1.28.”
Beginning early last week and lasting up until today, safe-haven demand as a result of increased geopolitical tensions in Ukraine and Israel have been yet another factor pushing the US Dollar forward. With investor uneasiness subsiding over the last two days, it will be interesting to see how the USD fares throughout the last three days of this week.
Over the course of the past year and a half or so, palladium has been seen doing little else apart from gaining value. As a key component in motor vehicle catalysts, demand for the metal has been rising in direct correlation with rising auto sales. Since the beginning of 2011, motor vehicle sales from around the world have shot up by more than 20%. Another reason for the rising demand is the increased use of palladium in diesel-powered vehicles. Prior to 3 or 4 years ago, diesel vehicles contained much more platinum than palladium. Now, all that has changed.
With recent US economic sanctions being placed on Russian businesses, the increasing demand for palladium may far outperform the actual supply of the metal. While it is still too early to determine if such will be the case or not, early indications are pointing in that direction.
Reports released early this week with regard to the Malaysian Airlines Flight MH-17 investigation have been the source of confusion for many investors. Despite it being widely believed that the flight was shot down by pro-Russian separatists at the helm of Russian-made surface-to-air missiles, those very same separatists have been seen almost wholly cooperating with early investigation efforts.
Reports released thus far show that, over the weekend, pro-Russian forces were seen turning over the bodies of victims to the appropriate authorities without incident. What’s more, rebel forces also cooperated with the handing over of the two black boxes to Malaysian authorities. It should also be noted that the black boxes were also recovered by the pro-Russian separatists. As a result of the incident-free handing over of bodies and black boxes, investor uneasiness with regard to tensions in the region have calmed down considerably. This has also caused US stock indexes to halt early week losses and gain some momentum today. As the week wears on and the investigation continues without any problems, investor risk-appetite may uptick ever so slightly.
Unfortunately for precious metals, increased risk-appetite means that safe-haven demand will continue to take a hit. With that said, however, violence in Israel is still keeping investors on their toes as the Middle East has proven time and time again that it is an incredibly volatile part of the world.
Looking ahead to the final few days of the week, it is likely that investors and market analysts alike will continue to pay close attention to the situations in Ukraine and Israel. With little economic data on the slate and those two situations developing further as the week progresses, there will be little else for investors to mull over and discuss.