Gold And Silver Skyrocket

Gold and Silver skyrocketed on Friday. Gold added $21.70 and ended at $1,397.80 after breaking through the 1400 level during the session. Silver added 4% to close at 24.08 after trading as high as $24.24 an ounce. These quotations represent the highest seen for precious metals in weeks. The technical charts point to further gains. It is therefore greatly likely that the strength in prices will spill over into this week’s trading.

A weaker than expected July 'new home sales' report, which decreased 5% since June, created new bewilderment in the markets. The July minutes from the US Federal Reserve created new uncertainty regarding when FED will eventually start tapering its bond buying program of $85 billion a month. This gave precious metals a strong boost. Gold broke out of the technical resistance in $1377 – 1380, helped by increased Silver prices on its way up.

The disappointing housing numbers also had a negative impact on the dollar. The new housing data gave rise to new speculations when tapering will start. September seems unlikely now and currency analysts are pointing to December as more realistic. It is generally believed that tapering of the central bank’s monetary easing would lead to an increase in interest rates and a stronger dollar. The dollar basket, DXY, weighed against six major currencies, decreased. The dollar lost ground against both the yen and the euro. EUR/USD climbed above 1.34 on the housing numbers.

A second reading of German gross domestic product confirms that Europe’s biggest economy rose 0.7% in July. This looks positive for Angela Merkel’s re-election opportunities in September, and for better perspective for growth in the eurozone. Despite the temporary decrease in the dollar, it is much more favoured by investors over the yen for the rest of 2013. The euro has also gained healthily against the yen over the recent week.