Prices for both gold and silver rose for the third straight week, the first time this has happened in a year-and-a-half, as demand for precious metals continues to stabilize in the West while physical demand in the East remains strong. The latest data from the World Gold Council showed record gold demand from China last year as investors in the West sold, however, many analysts say Chinese demand is understated by a wide margin.
The technical picture for precious metals remains positive, and this was aided by weak economic data that bolstered the case for the Federal Reserve to go slow in tapering its massive money printing effort. Some Western analysts now see higher metal prices ahead, however, while U.S. investors are clearly no longer bearish, recent metal ETF flows indicate they are not yet very bullish.
After dipping at mid-week after the release of the January Fed meeting minutes, precious metals ended the week on a strong note. Part of the late-week surge was due to renewed safe haven demand stemming from violence in the Ukraine, however, there is a growing consensus that recently weak economic data in the U.S. and elsewhere may not be due solely to bad winter weather, in which case, the Fed may have to rethink its tapering plans.
The central bank doesn’t exactly have a sterling track record in predicting turns in the U.S. economy and, if the plunge in Citigroup’s Economic Surprise Index shown below is any indication, they might already be behind the curve again.