Gold And Silver Take A Beating

Gold and silver struggled again on Friday, with a pickup in the US dollar versus the euro hurting bullion prices. December delivery Comex gold fell 1.2% to settle at $1,724 per troy ounce. The two-day European Council meeting in Brussels concluded last Friday with Spanish prime minister Mariano Rajoy indicating that his administration is not yet ready to request a bailout. However, his centre-right party’s victory in regional elections in Galicia at the weekend has helped the euro slightly in trading this morning – the currency stabilising around US$1.3053 this morning.

The EUR/USD managed another positive weekly close last week, gaining 0.53%. Stock markets remained generally strong, while US 30-Year Treasury yields were up a notable 3.6%. Last week may have been disappointing as far as precious metals were concerned, but the post-QE reflation trade does still seem to be in effect.

The aussie and Canadian dollars both notched impressive gains against the US dollar – the Australian dollar gained over a whole cent in trading on Wednesday – indicating that the Fed is indeed getting its wish for a weaker dollar. How the monetary authorities in Canada, Australia and other countries respond to this will be worth watching.

Wednesday is the big market day of this week, with another two-day Federal Open Market Committee meeting concluding that day, and China reporting new manufacturing PMI estimates for October. Recent data from China has indicated that the economy there is regaining steam, so investors will be watching this new number for further bullish confirmation.

Fed watching is pretty boring now that the FOMC is committed to endless quantitative easing, though we may get some interesting moves in gold and silver, depending on whether or not the Fed comes across as pessimistic on the economy (bullish for the metals) or optimistic (bearish).