It was an interesting week. The modus operandi was as we know it from previous weeks. Monday and Tuesday were usual trading days and nothing extraordinary happened. Prices went down the next day. This time significantly. Gold bottomed around $ 1390 and silver around $ 22.5. The trend was given for next two days. Both metals moved slightly down on Thursday and gold was below $ 1380 and silver almost tested $ 22 level. Friday was the same story.
Gold finally closed on $ 1360.2 per ounce what was $ 87.9 lower compared to previous week. Silver closed on $ 22.26 per ounce what was down $ 1.61 compared to previous week. The gold/silver ratio is 1 to 61.11 (i.e. you could buy 61.11 grams of silver for 1 gram of gold, it was 60.67 week before). So silver was hit a little bit more compared to gold this week. HUI index (index of the most important gold mining companies) was smashed to $ 246.07 and was eye watering down of 33.9 compared to previous week. XAU index (index of gold and silver mining companies) was $ 97.49 what was down of $ 11.03 compared to the previous week. Net short concentrated positions of bullion banks on COMEX were slightly down on silver as well as on gold.
Both prices of precious metals had down trend sentiment this week which was set up previous Friday. One reason behind could be connected with lower liquidity flow expectations and that everyone is heading into the stock market which is just keep going. The second reason could be connected with World Gold Council announcement about lower global demand for yellow metal which was down 13% compared to Q1 2012. The last but not the least reason is some confusing hints from FED about ending and not ending of the bonds purchase policy at the same time. And do not forget the fact that this news is very well used by bullion banks which still have vast and concentrated short positions on COMEX. What could we expect and to be prepared for in the short term? We still have some backwardation especially on short term contracts. It means some stress on the physical market. But as we wrote last week we could expect some more lows and especially on silver. It is still possible to see the same lows as we witnessed in April. It means $ 1300 for gold and it is very probably for silver to retest $ 22 and cross below it to set up a new short term low.
I still do not think that it means something wrong from the long term. It only means an opportunity to get some piece of physical metal for better prices. We will see what happens with physical demand if both metals set up new short term lows.
Overview of the prices of gold and silver for the remaining periods:
Source: upner.com, kitco.com