Crude Prices Could Impact Precious Metals – Again

As precious metals head for the finish line this week, gold and silver are currently trading above $1,150.00 and $15.50 which may be a victory of sorts considering all the negative factors currently weighing on precious metals. The USD has taken a bit of a break from its “take no prisoners” rally which has helped as physical demand remains for the moment strong enough to offset speculative selling. The next headline we may have to deal with (and it could come today) is from crude oil which is once again under very heavy pressure. Crude is down 2 percent this morning and down 7 percent for the week as it currently sits on either side of $46.00. Extreme U.S. stock market volatility has returned which may support gold if U.S. equities are pushed lower and capital rotates back to our market.

Just when U.S. economic data, as witnessed by the recent jobs report, would set the stage for a rate hike by the FOMC, we have very disappointing data yesterday and today which clouds what the FOMC may be able to do in the coming months. Yesterday, we received a third straight very weak reading on retail sales. While this may be impacted by the bad weather, I do not see how the FOMC can raise rates while consumers are cutting back on their spending. This morning gave us further signs of an economy that is not ready for a hike in interest rates as the Produce Price Index has fallen for the fourth straight month and after a run of positive numbers the Consumer Confidence figure has unexpectedly fallen. Next week should certainly be interesting as the FOMC meets for 2 days with a press conference scheduled for Wednesday afternoon which will no doubt move all markets.

Have a good weekend,