Precious Metals Reacting to Strong USD

Precious metals and all financial markets continue reacting to the two major economic headlines which are: the strength of the USD and when will the FOMC raise interest rates. The USD has moved higher by leaps over the past two weeks and now sits at 11 year highs. On modest volume, gold and silver continue probing lower as: physical demand, which has picked up, is unable to offset speculative selling, the ETF market experiences liquidations and crude oil saw a drop of over 1 percent yesterday, which added pressure. Platinum and palladium were hit a bit harder as platinum has fallen to 5+ year lows and palladium has failed to hold $800.00.

As the European Central Bank implements their QE policy, interest rates through much of the EU are falling to historically low levels which further supports the USD. Add to this the growing likelihood of U.S. economic data supporting a rate hike this year, it is difficult to see in the short term the USD not continuing to rally. As prices fall, we continue to see a pick up in physical demand, but gold and silver could be vulnerable to another large decline if physical buyers take a step back and look for lower entry points. For the moment, any rally attempt is likely to be viewed as a selling opportunity by speculators and producers.

Roy Friedman has over 30 years of in-depth experience in all facets of precious metals.