While investors started the week hoping that metals would rebound from the massive losses they posted late last week, things turned out quite differently. Thanks to some comments by the President of the Atlanta Federal Reserve and weak demand out of Asia, gold and silver took massive hits for the second straight week. Each and every time we see gold and silver fall dramatically it seems as though metals have bottomed out, but each and every time we are proven wrong. Precious metals have not only had a bad 10 days, they have had a terrible first half of the year and even worse second quarter.
Federal Reserve Dictating Spot Value Movement
If you have been paying attention to the precious metals market lately, you are well aware that the United States Federal Reserve has had their hand in which direction and how drastically gold and silver have been moving. Last week saw Fed Chairman Ben Bernanke make some comments in regards to the future of monthly bond buying in the US, comments which caused gold and silver to drop in value rapidly. Bernanke stated that while monetary policy in the US will not be changed immediately, there is a good chance that things will be flipped on their head in the coming months.
Dennis Lockhart, president of the Atlanta Federal Reserve, announced on Thursday that the Fed will attempt to balance its budget and this means that QE and monthly bond-buying may soon become a thing of the past. If that is the case, gold and silver will lose a lot of their allure as safe-haven assets.
Weak Asian Demand
Historically, the summer months have seen Asia buy up physical gold and silver more so than just about any other part of the world. This year is not like most others in that demand for precious metals has been at a minimum in Asia and in most other parts of the world.
While a decline in the spot value of gold and silver tends to bring out bargain hunters in search of a cheaper market, this time is different. Investors are unsure as to whether gold and silver will stop their decline or continue to fall and has caused them to shy away from buying any metal, at least for now. Seeing as gold has lost over $200 in the past 10 days or so, you cannot really blame investors for not wanting to buy just yet.
India is a nation that loves its gold and silver, and due to a recently instituted tariff being placed on precious metals imports, the usually high demand has been struck down. Even the falling spot values of gold and silver are not enough to spur increased demand in India.
Weekly Move
This week, much like last one, has been marred by heavy losses for both gold and silver. While the early parts of Friday are seeing the metals fight back a little bit, what is done is done and losses have piled up very high.
Gold started the week at $1,298, and by closing time on Friday was sitting at $1,235.
Silver started the week a little over $20, and by the end of the day on Friday it was resting around $19.70.