Saturday, 31 August 2013

Precious Metals Review: September 2013

September has come and gone, and it was yet another exciting month for gold, silver, and other precious metals. Several important developments have affected the prices of gold and silver over the last month and have laid the foundation for potentially important developments in the months to come. Read on to find out more.
Here's a quick recap on prices (all prices per OZ):
  • Gold started the month at $1,395.95. The market was quite volatile with prices dropping to $129.96 on the 18th before recovering to $1,340.46 at the end of the month.
  • Silver prices were also volatile, starting at $23.54 before surging to $24.42 on the 3rd. Prices then followed a bumpy road downwards before landing at $21.75 to close the month.
The United States government has now shut down. So far, bullion prices have not really reacted to the shutdown. This was widely expected as most investors already realized that a shutdown was imminent and had reacted accordingly. While a short term shut down will likely not result in major movements in the market, if it continues for an extended period of time, bullion prices may rise moderately.
If United States government defaults on its debt, however, expect prices to spike. While the United States government may shut down or have to take other emergency measures, it's unlikely that it will default. Still, with prices so low and the possibility of a major fiscal crisis, now might be the time to buy precious metals. If the government is able to quickly work out a budget and debt deal, however, bullion prices will likely not be heavily affected.
The Chinese Central Bank called for increasing the number of firms allowed to import and export gold. At the same time, the government will also be easing restrictions on individual buyers. It remains to be seen if the Chinese government will act on the Central Bank's suggestions, though so far the prognosis looks good. Chinese customers are already among the world's biggest purchasers of gold, so these policies could cause a demand spike, which will send prices upwards.
India, on the other hand, has been trying to decrease the amount of gold being bought in the country. This might help explain why silver imports have recently spiked by more than 310% in the first quarter of the fiscal year. Exports for Indian made silver jewelry have also expanded by 156%, also adding to the increase in demand. Whether or not these developments will push silver prices higher remains to be seen, but India has traditionally been one of the largest purchasers of precious metals.
Investment Outlook
Meanwhile, the world continues to stand on shaky ground. Beyond the ongoing debt ceiling problems in the United States, the European Union economy continues to stagnate. At the same time, China's own debt problems continue to worsen and some analysts are warning that the country could see a fiscal crisis on par with the 2009 U.S. Fiscal Crisis. With so much uncertainty in markets across the globe, investments in gold, silver, and other precious metals could turn out to be wise investments.

Not everyone, however, has such a bullish outlook. A group of analysts at Citi have predicted that silver prices will angle downwards throughout 2013. The group cited strong supply from mines as a key reason why prices will continue to drop. Silver prices are already down by nearly 30% for the year, and if they decline any further,  silver could become a great buy.

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