Precious Metals Week in Review
The best way to categorize last week’s price action in the metals market would be “mixed signals”. In advance of the Federal Reserve announcement on Wednesday, traders were looking for any sign that someone knew something that they did not. Gold saw a modest selloff on Monday from its $1,797.00 open to $1,781.00. That was followed by a spike on Tuesday to $1,811.00 as differing opinions confused expectations of the FOMC impact.
After the announcement that the increases would continue for some time to come, December’s increase would be only a one-half basis point rather than three quarters it sent confusion through all markets. The Dow Jones Industrial Average tumbled, and gold followed down to $1,776.00. After some time to digest what all of this meant, the Dow continued to fall while gold recognized that this was good news for the yellow metal and rallied to $1,791.00 close.
Gold held its own while the DOW lost nearly 1,200 points or 3.6% for the week. Apparently, the consensus was that inflation would not go away anytime soon, but the hawkish size of the recent rate increases was too damaging to an already fragile economy, so they needed to be cut back some for now. Sizable increases in interest rates have all but killed the real estate market. The increase in borrowing has stifled manufacturing plant expansions and led to imminent cutbacks. The tech sector is experiencing double digit layoffs as the job market is experiencing the first signs of companies making themselves lean enough to survive the coming recession that is already here. A recession is a normal occurrence in an otherwise healthy economy. When political influences or force majeure events delay the normal occurrence, the result is a deeper and longer correction than would not otherwise have been necessary. Welcome to the eve of the Great Recession of 2023. The two questions to consider are how long and painful it will be, and will it be televised?
Silver mirrored gold’s performance for the week. Best described as unchanged, silver opened at $23.48 and closed at $23.21. While the precious metals sector is earning headlines and attention throughout this fourth quarter, silver is gaining some long-needed respect with its ability to stand on its own two feet without trickle down assistance from its big sister. It is important to pay attention to your ratios in the precious metals when considering the coming events.
You will have more units per dollar allocated with silver. More units does not necessarily mean more profits. Your percentages must be allocated across the precious metals sector. Your considerations include facts like, Gold will not experience the same negative pressure from decreased manufacturing demand that Silver will. Gold and silver will both be strongly driven by investor demand as an alternative investment. Numismatic gold and silver coins can not be ignored as previous bull markets have seen exponential returns on this well-kept secret. The primary question that should be asked right now is, “What has taken me so long to start or increase my metals holdings?”