3 December 2014

Gold and Silver’s Price Movements

We posted an article earlier in the week on the wild price action of both Gold and Silver over the weekend and wanted to go into more detail about it. According to data provided by ZeroHedge, Silver rose 17% from intraday lows on Monday. This was the biggest positive swing since their data began. (Source: ZeroHedge 12/01/14)

Gold also had a dramatic day moving up over $70 from its intraday low. Both Gold and Silver have moved a bit lower over the last couple of days. However, Gold is back above $1200 and Silver is holding steady just above $16.40.

Many traders and analysts were left scratching their heads about the volatility in the metals unable to explain the surge, especially after the failed Swiss Gold vote. One plausible reason for the unexpected rise in the metals was the collapse in the oil market. Many hedge funds were likely caught off guard by the steep decline in oil prices and were forced to rebalance their positions, which impacted Gold and Silver.

Japan Downgrade

One of the most under reported stories that hit the newswires on Monday was Moody’s downgrade of Japan’s credit rating. According to an article in Bloomberg, Moody’s Investor Services reduced the rating one level to A1.

Moody’s cited uncertainty over whether Japan will be able to achieve its deficit-reduction goals and grow its economy. (Source: Bloomberg 12/01/2014) The article went on to report that Japan is “burdened by the worlds heaviest public debt load”.

What is remarkable is that Japan is the worlds third largest economy and most traders and investors barely paid attention to the news story. However, precious metals investors looked at the situation as a confirmation that there is likely no way out for Japan.

More Downgrades to Come

Many investors have been perplexed as to why Gold and Silver prices have not moved higher with all of the money printing by the Central Banks. In our view one of the reasons this has been the case is the level of confidence the general investing community has in the monetary masters at the Central Banks.

The Japan story re-enforces that many major world economies are not showing much improvement despite record amounts of stimulus. So, it is possible that the buying that occurred on Monday is sign that some may be recognizing the dire economic situation that Japan and many other countries face.

While it still may be unclear as to whether Gold and Silver will rally from here, headlines like the one from Japan are likely to be more frequent in the coming months. Future policy announcements by Central Banks may now be met with buying precious metals, not selling.

Author: celticgold.eu

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