Gold and Silver Report 13 April 2015

Gold and silver prices declined through the week as the U.S. dollar resurged after details from the U.S. Fed’s meeting minutes, and split views from Fed officials, showed that an earlier rate hike was not ruled out. Weak buying in India and China, the two biggest gold consumers, has also pressured gold prices. Gold ended the week down overall, though managed to reclaim at least a 1% rise on Friday thanks to a technical resistance break.

Price and charts snapshot:

As the week opened, Gold rose to a seven-week high after the last week’s U.S. jobs had only rose the lowest in over a year, fueling expectations the U.S. Federal Reserve would postpone an interest rate increase.^[1] Gold began a descent, steady below the seven-week high on Tuesday, as the U.S. dollar regained some momentum.^[2] On Wednesday the yellow metal extended losses, falling below the $1,200 mark after it was revealed that the U.S. Federal Reserve meeting minutes had not ruled out an interest rate hike by June, causing the U.S. dollar to climb, weighing on gold prices.^[3] Weakness also came from poor physical demand from China, the second-biggest gold consumer. On Thursday Gold retreated for a third session with the U.S. dollar hovering around one-week highs after some Fed officials showed split opinions favouring for an earlier hike in interest rates.^[4] On Friday Gold managed to regain 1% to USD$1,206.46 (AUD$1,571.26) an ounce by the afternoon, after a technical resistance break at USD$1,196 (AUD$1,557.64) triggered automatic buy orders. This appeared to enable the precious metal to resist the stronger U.S. dollar and world equity markets, which were testing record highs.^[5]

As of late, many market participants were expecting a U.S. interest rate increase in September or even later. This view was supported by the latest U.S. nonfarm payrolls rising by only 126,000 last month: less than half of February’s increase and its smallest gain since December 2013. This data pushed the U.S. dollar lower, making U.S. dollar-denominated gold cheaper for other currencies, helping to boost good initially.

However these gains were pared later as the greenback later returned higher, particularly after the latest U.S. Fed meeting has revived expectations of an earlier June hike. In addition, gold demand from India and China, the world’s top two gold consumers, has been weaker this year. Howie Lee at Phillip Futures said “There are more investment venues for the Chinese to look into other than gold. Equities are roaring ahead and they can now buy bond futures. I don’t see why people should buy gold at this time”.^[6] Meanwhile in India, gold purchasing could fall as millions of Indian farmers have been hit by erratic weather and falling commodity prices.^[7]

By Lisa Casagrande | https://www.goldbullionaustralia.com.au