Did anything change during the past week for precious metals markets?
Recent economic data has just revealed how fragile the U.S. economy stil is. This suggest that it is not likely the Federal Reserve soon to change its current policy and stop printing money. Interest rates would remain low it seems, at least in the near future.
During the past week, silver challenged resistance levels, just above $32 an ounce, before faltering. However, it ended with a big weekly gain of 2.1%, from $31.18 an ounce to $31.84.
Despite the recent optimism, the U.S. economic recovery is still very weak. As a result, it looks like there is plenty more of both increased debt and Fed money printing to come. The U.S. economy remains heavily dependent on more deficit spending and more money printing by the Federal Reserve and it is likely to get about a trillion dollars of each this year.
Surging silver and gold coin sales in January make clear that many Americans have come to this same conclusion. According to Bloomberg: “Sales of American Eagle silver coins by the U.S. Mint jumped to a record this month on increased demand for an alternative to currencies as the U.S. central bank presses on with unprecedented stimulus.”
The U.S. Mint reported that 7.5 million ounces of silver coins were sold in January, the biggest monthly sales total since they started keeping records in 1986 worth just shy of a quarter of a billion dollars. While sales are expected to slow in the months ahead due to seasonal factors, this is a strong start for the year.
Apparently, U.S. mine production, in particular, is falling. The U.S. Geological Survey reported last week that domestic mines produced 230 tonnes of gold in 2012, down from 234 tonnes in 2011 and silver production fell from 1,120 tonnes to 1,050 tones. Elsewhere, production is reportedly rising. With markets turning increasingly global, supply is an important factor for the silver price.
Central banks continue to buy gold. The International Monetary Fund reported that Russia added 20 tonnes in December, raising their holdings to 958 tonnes, and Kazakhstan’s gold reserves increased by 2 tonnes to 115 tonnes, up over 40 percent on the year. Central banks purchased about 500 tonnes of gold in 2012 and they remain an important source of demand. However, central banks do not buy silver.
In addition, there are more downward revisions to gold and silver price forecasts. Nevertheless, the lowered price targets still represent reasonable gains from current levels.
BNP Paribas maintained a positive outlook for precious metals but predicted an average 2013 gold price of $1,790 an ounce, down from $1,865, while also lowering its average silver price forecast by $5 to $34.10 an ounce.
At present, $1,800 an ounce gold and $34 an ounce silver in 2013 would look pretty good to most precious metals traders.
