December 18th Weekly Silver Market Update

Precious metals may have made gains on the final day of the week, but the week on the whole has not been favorable to gold nor silver. This was a momentous week not only because it will be one of the last uninterrupted trading weeks of the year, but because of a major decision made by the Federal Reserve.

With the Christmas holiday fast-approaching, and New Years quickly following it, we will be into the year 2016 in no time at all. What does this mean for gold and silver? That much is tough to say, but recent weeks have seen market conditions stack up against precious metals at seemingly every turn. As we go forward, it is difficult to envision gold and silver being able to make significant, lasting gains anytime in the near future.

Fed Raises Rates

Prior to this week of trading kicking off, investors were focused on the Federal Reserve and their meeting, which was held over the course of Tuesday to Wednesday. In the wake of the meeting on Wednesday it was announced that interest rates in the US would be risen by .25% for the first time in well over 7 years. In addition to this hike, which was mostly expected, the Fed went on to say that further increases are likely to take place so long as market conditions warrant.

In the immediate wake of the Fed’s decision, the spot values of both gold and silver managed to make somewhat decent gains. Though this was surprising, the very next day saw spot values fall dramatically. Unfortunately, this seems like what will continue to be the case as we move forward through the last two weeks of this year and into next year. For equities from around the world, the decision made by the Fed helped boost markets.

For gold and silver, the future is certainly uncertain. While it now looks like spot values are going to have a tough time moving forward, things may get even tougher as things change. For one, the fact that crude oil is continuing to decline is something that is continuing to work against precious metals. As a leading commodity, the price action of crude oil often dictates that of most other commodities. And with Iranian crude oil looking like it will soon be allowed to be sold in Western markets thanks to the lifting of sanctions, the already notable supply glut will only grow larger.

In addition, falling spot values threaten to undermine the profitability of the mines that produced both gold and silver. Many experts agree that if gold’s spot value falls below $1,000/ounce, many mines will no longer be able to extract the metal from the earth. Though they may be able to make money on the gold itself, other costs such as those for equipment and labor would prove to be a futile effort. We are still a fair way away from that price point, but it is assuredly something investors should not count out.

Looking ahead to the next two weeks, you can expect that things will remain generally slow across the global marketplace. With the Christmas holiday only a week away, many investors will be spending more time with their family and friends than anything else. The slow nature of the marketplace is something that will not bode well for precious metals making any lasting gains.