Gold
TAPERING ENDS, INTEREST RATE RISES TO COME
Tapering has finally ended and QE seems like a distant memory for the United States as a result. However, gold prices have remained strong, around $1200 in the previous months, as traders are still unsure on the future of gold and the US economy. What is certain though is that 2015 will be the year we see the US look to raise interest rates after keeping them at historic lows for an unprecedented amount of time. Market expectations are for the first interest rate rise to occur during Q2-Q3 of2015 and another possible one during Q4.
EUROPE STILL A PROBLEM
Commodity speculators have been hiding in the precious metal markets because of the problems in Europe as of late. From Russia to Greece the same uncertainty keeps driving investors back into the market. The problem that has become more apparent has been the re-emergence of Greece and the Syriza party which, according to recent polls, could take power.
European leaders have warned against such an anti-austerity party (Syriza) coming to power, and German leaders have even threatened to pull out from the country altogether, which in turn, could lead to Greece being pushed out of the eurozone all together and creating a headache for Europe. Either way, such an event could have a large rallying effect on gold prices just based on the uncertainty that such an event could produce.
Silver
ECONOMIC SITUATION CONTINUES TO IMPROVE
While the eurozone may still be struggling on the global scene, the US economy is doing anything but, with strong results in its retail and consumer sectors for the previous months. This, coupled with the coming rise in interest rates, is likely to further strengthen the US dollar, which in turn could lead to a further decline in silver over all.
This view of silver and the global economy is taken on the back of a spectator’s point of view. Economic growth does impact the silver market, and we could see a rise in the use of silver in technology which could bring back some buying to the market place and raise demand for the precious metal on an industrial scale.
OIL’S DROP IS METAL’S GAIN
The cost of producing metals is directly related to the cost of energy to extract the metals out of the ground. In the case of recent events in the oil market, we may seethe overall cost of producing silver to fall sharply and this may have a flow on effect in the market, especially if the bears keep having their way. However, after the recent large drops in 2014, the last few weeks saw a shift sideways and a return to a ranging market, so the impact of further oil price drops may be muted until the market regains control and finds direction.
Oil
OPEC’S ABILITIES WEAKEN
OPEC as of late has looked unlikely to act in the market and this is likely to be sustained in the current future as Saudi Arabia, the major contributor to OPEC, believes that recent price drops are nothing to be worried about. Additionally, the power of OPEC has waned heavily over the last few decades as players like Russia have turned on the taps to bolster their own economy, and it’s likely that it won’t change at all.
With OPEC’s inability to enact any sort of reduction in supply, and with global demand being lackluster, forecasts have also been cut, with current OPEC forecasts predicting demand will drop to 28.92 million barrels per day (bpd) in 2015, down 280,000 bpd compared to the previous forecast.
US OPENS UP CRUDE MARKET
The global supply of oil has always been under threat from global and economic shocks, but 2015 may see are turn to stability from a geopolitical standpoint as the US economy starts to export various crude oil products. At this stage, it’s deeply worded with caveats and is seen as a trial, but many are picking that it will further expand over the course of the year into full on exporting of all US crude oil products.
This excess supply will likely help keep oil prices depressed in the event of Middle Eastern wars (ISIS threat) and it’s likely that the market may smooth out as a result; rather than the previous spiking that has been seen on the charts during geopolitical uncertainty.