Gold and silver prolonged their decline as the metals have lost significant value for the second straight week. Over the past 7 or 8 days we have seen gold decline by over $200 while silver has lost well over three dollars. Weak demand out of Asia coupled with some comments made by Federal Reserve members are part of the reason why gold and silver have declined even more this week. Every time we see the metals decline significantly investors are convinced that gold and silver have bottomed out but each and every time the spot values fall even further. To say that this is the end of gold and silver’s decline would be naive, so all we can do is sit back and wait to see how far this dip goes.
A Dismal First Half of 2013
Gold, in the first part half of 2013, has lost over 30% of its value. In fact, the yellow metal has lost a quarter of its value in the second quarter alone. The thing that differentiates this most recent collapse from the one we experienced in April is that bargain-hunters have not come out in big numbers. Usually, whenever the spot value of gold and/or silver falls, even if only a little bit, demand spikes. Investors are now uncertain as to whether gold and silver will recover from this decline and thus bargain hunters are waiting it out to see just how far the price of gold will fall.
Investors and market watchers alike will be paying close attention to the spot values of gold and silver in order to get an idea of just how far this trough will reach.
Weak Asian Demand
The summer months are full of holidays and other gift-giving events across Asia. For this reason it is very common for the physical demand of gold to spike due to the fact that it is tradition to give precious metals as gifts for these holidays and events.
Indians also sport very high demands for gold and silver, though a new tariff placed on precious metals imports has done a good job of subduing that demand. This tariff was put in place in an attempt to balance a very unbalanced trade budget. Though Indian demand for gold is historically high during the summer months, it tends to spike even higher when the price of gold and silver falls like we have seen it do lately. This newly instituted tariff has prevented many Indians from taking advantage of the currently low prices.
Gold started the week at $1,298 and after a 5 days of heavy hits is now sitting at $1,235. Silver, on the other hand, started the week at a little over $20, and is now sitting at $19.70.
This market update is provided weekly with analysis. You can always check current spot silver by watching our on-site charts.