Precious Metals Weaken On The Global Recovery

FXEmpire   |  February 12 2013 1:22 EST

By FXEmpire.com

Gold came under pressures amid thin trading volumes as Chinese market was closed due to the week-long Lunar New Year holidays. U.S. gold futures for April delivery settled down $17.80 at $1,649.10 an ounce, with trading volume about 5 percent above its 250-day average. This morning gold continues to decline trading at 1645.35 off by $3.75 prices were down as physical demand from Asian markets dried up due to Lunar New Year holidays and hurt prices.

Gold was also hurt as investors remained cautious ahead of the G20 meeting which could give direction to the global currencies movement.

SPDR Gold Trust showed a 1.2-ton outflow in holdings so far in February, compared to inflows of 6.05 tons in the same 2012-period. Gold prices are expected to go down due to technical selling and low liquidity. The SPDR Gold Trust, golds largest exchange-traded fund (ETF), also saw its first inflows since mid-January, though holdings so far this year are still lower compared to a year ago. Gold has now falling well behind the value of platinum, where the price has been rising steadily as traders bet on demand improving in the event of the global economy picking up as it is heavily used by car makers in catalysts that control exhaust emissions.

News that the Federal Reserve may keep interest rates near zero after its bond-buying ends, even after hitting its targets for unemployment or inflation, in order to maintain stimulus also continues to weigh on gold prices.

If the ECB or the EU policymakers in the EU Summit come up with big headlines regarding the progress of the EU economy this could influence euro traders and indirectly affect precious metals with a positive bias. At the same time the upcoming reports regarding the U.S economy including: consumer confidence, retail sales and jobless claims, could affect the USD and bullion prices also. If these reports will show contraction in the U.S economy, they may positively affect gold and silver or vice versa. The U.S money base has increased in recent weeks, which could lead to a rise in the price of gold via its growing demand as a safe haven investment.

On the economic data front, the US NFIB small business optimism may improve slightly. Because the government is focusing on large businesses and imposing higher tax on them, small business outlook should come out better. Dollar is therefore likely to remain strong which should be another factor for gold to remain under pressure.

Silver remains weak weighed down by the drop in demand for precious metals as the rise in demand for industrial metals is not enough to support prices. Silver is trading at 30.81 this morning. Silver is expected to follow cues from gold as mentioned above.

Click here a current US Dollar Index Chart.

Originally posted here