Week ending 5th April 2013

Questioning WHY precious metals were hammered last week?

By Wednesday last week, Gold had tumbled to a 9 month low breaking below US$1,550, while Sliver fared even worse and seems to have been somewhat friendless.

Why? It appears that the fundamentals have been lost on many for the moment and there is more interest in turning a short term profit where emotion rather than reason has been taking hold. Certainly there are reports of 'stops' being triggered and this certainly occurred when Gold hit and broke a significant bottom at US$1,560. There was a theory that one or two major funds had been liquidating.

We then saw a minor correction on Friday and at close there appeared to be some stronger support indicating that we will see slightly higher levels on opening this week.

This sell-off has been surprising when we examine the fundamentals, where the Eurozone is not improving (Bloomberg reported European business confidence down), more Central Bank easing especially with Bank of Japan announcing that they will inject US$1.4 Trillion into the economy over the next two years, Italy in crisis politically, continuing questions over the US budget and debt ceiling issues and what could happen if North Korea turned words into actions.

Given the experience of last week and the continuing flight to equities, predicting the time and price for the bottom of Gold and Silver is impossible. The medium term outlook for 2013 remains at higher levels and if we consider fundamentals rather than short term fluctuations, then it is more about considering when to buy and when to take a long term position.

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