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Data Wrap Up – October 2014

Metals Prices
ResourceLast1 Month Ago3 Months Ago1 Year Ago

After a weak performance over the last month, gold was helped last week by a slight slowdown in the US dollar’s momentum, which left the metal’s price flat for the month. Safe-haven buying amidst falling US equity prices, along with a change in expectations as to when the Federal Reserve will raise interest rates after dovish comments from officials, have also pushed investors back into precious metals. All in all, gold once again confirmed its safe-haven status, as it remains flat even though the S&P 500 was down 5% over the same period.

Although gold prices remained resilient, silver prices weren’t so lucky, as the spot price was down 6.4% over the last 30 days. At present, silver prices are at their cheapest levels relative to gold in five years. As with gold, a stronger greenback and US economy as a whole has weighed on the silver market. However, although dollar strength could weigh on silver for some time, silver is an industrial metal, meaning its demand could pick up as the US economy continues to chug along.

After months of steady appreciation, platinum and palladium prices had a poor performance since our last installment, after signs of weakened momentum in European and Asian economies came to light. Weak economic data out of the eurozone, China, and Japan stoked fears that demand for both metals may dry up, as they’re used in areas sensitive to economic growth, such as the automobile sector. Although the near-term picture is unclear, the world’s two largest producers—South Africa and Russia—are scheduled to meet in November to discuss supporting prices, which could make now an advantageous buying opportunity.

We’ll continue to keep our ears to the ground in regards to precious metals and will alert you if anything pressing comes to our attention.

If You Look Hard, You Can Spot the Silver Lining

Gold’s performance in 2014 has been nothing short of underwhelming, but at least it’s not silver.

The price of silver has now fallen for 12 weeks straight. Silver is cheaper today than it was in 2008 before the Fed unleashed its first round of quantitative easing (QE), and there’s no telling if it’s found a bottom yet. Statistics like this make you wonder if the investment community is suffering from amnesia.

Nonetheless, we have good reason to think silver will get its act together sooner rather later.

The iShares Silver Trust (SLV)—the world’s largest silver ETF—is revealing a possible disconnect between the silver price and investor sentiment. Despite a weak price environment, holdings in the fund have been on the rise for over a year and are approaching record highs.

Of course, not everyone is buying SLV as a store of value, since half of all silver is used for industrial applications. Nonetheless, the steady climb of SLV holdings suggests that investor sentiment is becoming more positive, and that’s a recipe for higher silver prices.

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