Precious metals had a “good day” yesterday as strong physical demand in Japan and China carried over into Europe, and then the U.S., as weak equity markets and falling bond yields brought traders and investors to our market. Unfortunately, yesterday’s gains have been followed today by all four precious metals being lower this morning as silver is once again trading below $15.00. As the market continues to be range bound, I will put forth a few factors in the current tug of war. On the positive side, we continue to receive mixed, at best, economic data from the U.S. and abroad. The recent rally in equity markets appears to be running out of steam and interest rates are again moving lower as witnessed by the U.S. 10 year bond now yielding just 1.75 percent which weakens the USD. On the negative side, we have an FOMC here in the U.S. which has told us interest rates are going up this year and in years to come, the only question is at what pace. I still believe we will see one 25 basis point hike in Q3 and one in Q4 this year, but a third hike along the way could weigh heavily on precious metals. Equally concerning is the lackluster demand for physical metals; not only in the U.S. but throughout the entire market. Along with this we have seen a slowdown in demand for ETF’s and a sharp fall in gold demand in India where imports have fallen by one-third, as compared to this time a year ago. As gold historically does best in times of uncertainty, we need to look no further than the race for President here in the U.S. to justify everyone having gold and precious metals in their portfolio.
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