After hitting a two-month low, gold prices saw a rebound, though the long-term trends remain uncertain. Despite its volatility, speculators are returning to purchase gold futures, while other precious metals have seen much less enthusiasm. Precious metal activities throughout the world are beginning to build confidence in gold among speculators, while other precious metals may see a cutback.
Gold Makes a Sluggish Comeback
After recent lows, gold experienced a lift as the performance of other precious metals remained mixed. As the implications of the government shutdown sank into the market, gold futures rebounded, though many analysts and investors maintain a bearish outlook. Despite the drop in prices, some physical investors see the long-term drop as an opportunity as the U.S. budget crisis looms in the future.
Market elements fueling gold’s rally include:
- Lower than expected job numbers from the ADP
- The dollar’s performance against the yen
- Support from quantitative easing
Despite gold’s comeback in the market, analysts remain wary of the precious metal’s outlook. Based on trends aross the industry, some investors predict that the rally is short-term in nature, fueled by a reaction to today’s economy and remains volatile. Furthermore, as the debt crisis continues to mount for the government, gold values will experience much of the pressure.
After the government announced that it would maintain its quantitative easing program, gold prices rallied immediately, causing speculators to question the upside. With gold futures rising above $1,300, it remains the leader in the volatile precious metals market.
While gold rallied, silver dropped to 12,198 contracts, which was a result of cutting 888 gross longs with the addition of 907 gross shorts. Activity from non-commercial silver was similar, mirroring the greater market trend. On the other hand, palladium raised its net-long position to an impressive 22,042 contracts, a result of cutting 621 gross shorts and adding 180 gross longs. In the end, this lifted the net-long to 23,649 contracts. Copper experienced similar volatility.
As the market responded to the government’s decision concerning quantitative easing, Texas moved to eliminate its sales tax on precious metails, particularly on bullion and coins. This legislative move by Texas puts precious metals on the same playing field as other investments, and many wonder whether other states will follow suit in their legislation.
Aside from removing the sales tax, this encourages Texans to do business in gold with consumers from out-of-state over the internet. Without the former 6.25 percent tax on precious metals, market activity in Texas surrounding gold is expected to dramatically improve.