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Precious Metals Week in Review – Week Ending January 8th

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BBS Team



GOLD Open $1,823.00  Close $1,866.00.

Dogs are running with cats. It is raining while the sun shines. And It took 15 votes to confirm the Speaker of the United States House of Representatives. Granted it was a full moon, but Precious Metals and Equities rallied together on Friday? And impressively! The Dow Jones Industrial Average was up 700 points on Friday for a 2% gain on the day. The S&P and the Nasdaq also posted 2% increases with gold overcoming a dismal mid-week loss to post a 1.5% gain for the last trading day in the week.  Not to be left out, Silver rallied 3% on Friday to erase a punishing mid-week loss.

The platinum family of metals followed suit, after being given up for dead, with solid gains in volume and price as well. The catalyst for the big day was two-fold with the December jobs report surprising analysts with a better-than-expected increase in the labor force. The ISM Services PMI report for the U.S. fell below the apparently keystone 50-point mark to signal weakness in supply surplus and production. While this report is more confusing than why you put a round pizza in a square box, Wall Street considered it, along with the jobs report, to be good enough to influence the Federal Reserve to ease up on the tightening of interest rates.

SILVER Open $23.95  Close $23.85.

If you went to sleep Sunday evening and didn’t wake up until Saturday morning to read the results, you would have missed the dance. It looked like business as usual for silver with a fast break out of the gate setting a fresh 9 month high at $24.52 on Tuesday before getting hammered by traders Wednesday and Thursday all the way down to $23.15 before joining the party on Friday to erase all but a dime’s worth of losses for the week. The shiny metal is comfortable in its new identity as a stand-alone asset and was not about to be a wallflower at the prom.

Considering that silver was and many believe still is the most oversold of commodities, coupled with recent resilience and sustaining power since the low posted in September, it is no wonder that silver bugs have driven the physical price of the metal to historic highs. Premiums remain dramatically high and shows no signs of retreating anytime soon. Anyone looking to take advantage of the Precious Metals secular Bull that is just breaking, would be negligent if not exposed to Silver. If reports are correct in showing that the inflation problem is nearing an end, one could expect manufacturing demand to increase interest in silver, which has performed with only investor demand for the past two quarters.

The question many are going to ask at this juncture of the early bull is, “What will propel the Precious Metals Sector from this point forward?” The real question should be, “What will impend it from going forward?” The answer to the latter is, Nothing. Consider three points.

First, we must remember that precious metals typically bottom around 11 to 12 months after the stock market peaks. The market is beyond that point, and gold and gold stocks have already bottomed after a two-year-long correction. Second, up until 2008, gold had risen every year for seven years. At present, gold is coming out of an 11-year-long secular bear market. Third, the best historical comparison based on Fed policy, and the structure of the bear market and economy is a combination of the 1968-1970 and 2000-2002 periods. Lastly, the amount of capital in precious metals today is dwarfed by that of 2008. Coincidentally, those downturns marked the start of secular bear markets in the S&P 500 and secular bull markets in gold.

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