Uncertainty At the Beginning of Debt Ceiling Debate Pushes Silver Prices, BNP Paribas and TDS Remarks on Future Fed Policy Strengthen Silver, Downbeat Weekly Jobless Claims Boost Silver, Euro Rallies and Supports Silver.
Despite the fact that silver is still fighting a minor technical downtrend, the white metal managed to post another weekly gain on fundamental news that supported it.
Silver opened spot markets at the beginning of the week on Monday, January 7th at $30.00 per ounce and closed out the spot market Friday the 11th at $30.46 an ounce.
A number of fundamental factors continue to underpin the precious metal. This past week, Congress kept up the uncertainty over the upcoming debt ceiling debate, BNP Paribas and TDS issued strong remarks on future Fed policy, the labor department released downbeat weekly jobless claims, and the Euro rallied to keep silver on the up and up for the week.
Uncertainty At the Beginning of Debt Ceiling Debate Pushes Silver Prices
Just when you thought Congress would allow the dust to settle on the fiscal cliff fights in Washington D.C., lawmakers are already sparring about the debt ceiling that they have yet to raise. Two weeks ago they came to an agreement on the income tax rates for 2013. At the same time, they put off the much debated spending cuts until March.
The debt ceiling debate will determine whether there will be more and higher deficits in the near future, or whether there will be aggressive Federal spending cuts. The higher debt ceiling with token spending cuts is the more likely outcome, which would continue to push precious metals higher. Silver found support in the uncertainty that never seems to find an end in Washington.
BNP Paribas and TDS Remarks on Future Fed Policy Strengthen Silver
Two major analyst investment banks put the recent speculation about possible early Fed tightening into a more realistic perspective this past week. BNP Paribas stated that they think the market might have overreacted to the dissent of a few Fed members who wish to end accommodative policy early.
BNP said that they see few reasons for U.S. growth to be much better this year, with a likely 1% to 1.9% growth for all of 2013. They do not see much room for the Fed to abandon its QE3 program this year as a result.
TD Securities concurred with this sentiment when they stated that the precious metals might have reacted too strongly to the more hawkish notes that the Fed released the prior week. They also do not see how they could wind down the quantitative easing by the end of the year.
Downbeat Weekly Jobless Claims Boost Silver
The jobless numbers for the week also disappointed those who believe the economy is getting much better any time soon. There were only 155,000 more jobs created, and this came in below many analysts’ estimates. This increased the downward pressure on the U.S. dollar. As the dollar drops, silver and gold tend to rise in contrast.
Euro Rallies and Supports Silver
The European Central Bank also met this week and kept interest rates unchanged. On top of this bullish for the Euro development, ECB President Mario Draghi issued more optimistic comments on the near term outlook for the European Union.
Both the Spanish and the Italians had better than expected bond auctions at lower interest rates this past week too. The Euro rallied sharply against the dollar on these developments. When the Euro rises, precious metals like silver tend to follow suit, as they are priced in dollars primarily. With the Euro on the rise, this should continue to bolster silver and gold prices in the weeks that come as well.
Take Away On Silver Market Prices
Silver has defied its critics in recent weeks who claimed with certainty that it would drop below $29 per ounce. So far, despite a slight technical downtrend that remains in place, it has managed to notch incremental gains and hold its own for the last several weeks.
The rising Euro against a declining dollar is a potential game changer for the metals complex that may take silver and the precious metals higher and help them to break out of their technical downtrends. So long as the fundamental factors continue to be positive for silver, you can look for it to regroup and rise on in the months to come.