Gold, Silver and Oil Markets Overview Update

Gold

After last week’s NFP (Non-farm payrolls) data gold was boosted. It looks fairly certain now that the tapering of QE will not be implemented this month, but later this year. Gold will also be further helped by the Syrian situation. The US is still waiting for the results that will be obtained from the UN on whether Syria used chemical weapons. These results will be obtained by the US government in two weeks. If a strike date is decided then this will further weaken the greenback. This geopolitical situation is accrediting gold as a safe haven. The US has got a lot on its plate at the moment this includes tapering, debt-ceiling limit and Syria. The debt –ceiling limit may be reached in October and this will further weaken the greenback. As gold is denominated in USD (US dollars) a weaker dollar, means that value of gold increases. It’s an inverse relationship.

India’s rupee (INR) has been declining due to fears over the Fed tapering. This has led to the depreciation of the currency against the dollar. A weaker rupee means you can buy fewer dollars, which in turn means you can only buy small amounts of gold. India is the world’s biggest consumer of gold along with China. We should see a reduction in physical demand which should see an effect due to this in the paper market for gold.

Silver

As we can see from the chart there had been two tests of R1. R1 proves to be a strong ceiling for the precious metal. Just like gold, silver’s happy days could well be coming. The tensions in Syria have aided the precious metal recently. Silver is a far more attractive then gold, it’s cheaper and it has many uses including medicine to energy and thus investors have started to prefer silver over gold.

With the addition of import restrictions as stated in our last article, a falling rupee has meant that households in India have switched from gold to silver. This has sparked an increase in physical silver and therefore the value of silver has increased over recent weeks.

Crude Oil

Crude Oil has been experiencing a lot of volatility in the markets recently. This has been due to the Syrian tensions. This has led to oil achieving the second highest high for the fossil fuel this year. Currently the fossil fuel is trading quietly. The surge in the fossil fuel price is likely to have a negative impact on inflation for countries importing the fuel. This will mean lower corporate balance sheets and maybe a cut in wage growth. Apart from this, Syria is the main concern. If the US proceeds with their strikes then we could see crude oil go to $147-$150 a barrel, just like in mid-2008.

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