Silver, Gold Strengthen on Asian Buying


Silver price finished at $19.60 an ounce in June. During last week, the white metal lost another 2.55%, further, the average weekly rate was $19.12 which was 8.81% below previous week’s.

In electronic trading on Monday, September silver rose 26 cents, or 1.3%, to $19.71 an ounce.

Gold for August delivery rose $19.80, or 1.6%, to $1,243.30 an ounce and it is firmly pushing up.

Gold and silver tumbled down mainly during the second part of June. U.S. Federal Reserve’s Chairman Ben Bernanke’s press conference following the recent FOMC meeting, in which he opened the door for FOMC tapering QE3 by the end of 2013, and China’s credit squeeze dragged down the prices of precious metals. Before the end of the month, gold plummeted by 12.12%, while silver price decreased by 12.49%. For gold, June was the worst performing month in recent years. For silver, this was the worst performing month since April 2013.

The gold/silver ration ratio slowly increased during the month, only to tumble down on the last week of June. The ratio increased as silver price has under-performed gold price. In June, the ratio ranged between 62 and 66.

During the past two weeks, a number of investment banks revised their gold and silver price forecasts for 2013 and 2014 to the downside. HSBC has lowered its silver forecasts for this year from $26 an ounce to $21 an ounce and reduced its 2014 forecast to $20 from $27 an ounce. This estimates, however, still project higher prices than the current.

Still the main reason for the metals to remain under pressure is the expectation for tapering of the U.S. Federal Reserve’s quantitative easing program. At present, no action was taken and it looks like there won’t be an action at least until December 2013. However, the markets over-reacted in advance during the past two weeks of June and Western ETFs withdrew massively.

Economists expect emerging markets weakness due to the forthcoming halt of the U.S. monetary policy, but such expectations are somewhat narrow, because the majority of central banks around the world continue to maintain very loose monetary policies and liquidity is in abundance, in particularly in Asia and the rest of the emerging markets.

Market analysts project a turmoil in emerging markets and the prospects of lower growth in China have weighed on gold and silver bullion. However, even though HSBC economists cut their forecast of 2013 Chinese gross domestic product to 7.4% from 8.2% and 2014 GDP forecast to 7.4% from 8.4%, the figures are far more optimistic than the figures released in the North America or Europe.

Consumer appetite for physical gold remains strong in Asia, while the production of gold is limited. Silver’s multiple usage, on the other hand, it would help the metal’s price to stabilize.

At present, precious metals are recovering in Asian trading hours. A positive physical demand will eventually help strengthening the prices up to some level.

However, the timing is not favorable for strong rallies, as summer is traditionally slow season and most of the market participants are not active as usual. In addition, public holidays would also affect trading in the coming weeks.


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