In this week’s Market Report for Precious Metals we are continuing to see prices drop. As we explained last week this is not completely unexpected. Gold has a history of seasonal losses during May and June. This year though, there are additional factors contributing to lower prices. On Friday, May 27th, Federal Reserve Chair Janet Yellen made comments at an event at Harvard University, saying that she is optimistic that the U.S. economy will continue to expand and that it could be appropriate to raise interest rates in a few months. Following those comments, on Monday St. Louis Fed President James Bullard said that global markets appeared to be “well-prepared” for a summer rate hike. These comments seem to indicate that the Fed is still pushing for a rate hike in June or July. This news sent the U.S. dollar to two-month highs on Monday. In early November 2015 we saw similar circumstances leading to a dramatic drop in precious metal prices. The Fed was preparing for a rate hike in December and the gold price dropped from $1200 to $1050 per ounce. This coming week investors are awaiting U.S. non-farm payrolls data for May, which are due out on Friday. A solid reading could strengthen expectations for a June rate hike.
Gold started the week at $1242.65, and by Wednesday it was down to $1220.60. On Thursday it jumped up a bit to $1223.85, but by Friday it was back down to $1216.25 at close. Monday, May 30th was a holiday for both the U.S. and British markets, which meant less trading. This helped push gold future below the key psychological support level at $1200 an ounce in electronic markets, a three-month low. Last week Minneapolis Federal Reserve Bank President Neel Kashkari said, “The world in general is not accustomed to this era of negative interest rates and in that environment, I think gold provides an alternative form of currency.” Indicating that negative interest rates, like those used by central banks in Europe and Japan to stimulate their economies, would be a last resort for the U.S. central bank. If the Fed does go ahead with a rate hike in June it would raise the opportunity cost of holding gold, which does not earn interest. Longer term, however, negative interest rates should boost gold. The next technical support for gold is at $1185 and a break of this level will open the floor towards the $1160 mark.
As it has been over the last several weeks, silver followed gold’s lead this week. It started the week at $16.27, and was down to $16.20. Thursday saw a boost up to $16.46, followed by a drop to $16.30 on Friday. At one point during the week, spot silver lost 1.6 percent and touched a seven-week low of $15.86. On Monday silver ended at $16.07. Silver will likely continue to follow gold, although the price drops may be less dramatic.
Platinum also saw losses overall, starting the week at $1007, and dropping down to $997 on Wednesday. On Thursday it also has a quick boost up to $1003, but was down on Friday ending at $984. On Monday platinum was down a bit more to $979.
Palladium saw less price fluctuation this week, starting at $545, dropping to $523 on Wednesday and ending Friday up at $546. On Monday palladium was down to $537.
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