Precious metals started the week strong on heightened tensions in Ukraine, but the combination of misleading reports on China gold demand from the mainstream financial media and renewed interest in U.S. stocks by Western investors were enough to send prices sharply lower. Early in the week, the gold price rose to a one-month high at $1,330 an ounce and silver held the $20 mark, but both metals ended substantially lower.
The trade-weighted dollar rose and the Labor Department’s March inflation report showed only a modest rise in consumer prices when some analysts were expecting more, these factors also weighing on gold and silver prices.
Big investment banks remain bearish on this sector and U.S. investors now seem to agree as gold ETF inflows earlier in the year have changed to outflows, a development that could signal even lower metal prices ahead.
Many factors combined to thwart what was a promising rebound in the gold price last Monday as the Ukraine crisis had entered a more dangerous phase over the weekend, prompting a renewed safe haven bid. Better-than-expected U.S. economic reports had investors piling back into stocks after big share price declines the week prior, and this likely drew some support away from precious metals. Also, the U.S. dollar strengthened steadily in recent days and, since precious metals and the trade-weighted dollar are inversely correlated, this too pressured gold and silver.
But, the key factor behind the recent dismal performance of precious metals was…