Gold and Silver Continue Dip as U.S. Coins Gain

Gold and silver continued a downward motion in early trade on Thursday, following a steadying in gold and a slight rebound in silver on Wednesday. The release of the U.S. jobless claims report is seen as an instigating factor that brought about the market movement, showing a decline in claims for the week and bringing about a modest firming in the U.S. dollar index, putting pressure on the precious metals.

U.S. gold futures for February delivery traded down $4.00 to $1,689.90 per troy ounce. The spot price of gold lost $6.40 to $1,688.50 per troy ounce. Comex silver for March delivery traded down $0.237 to $32.705 per troy ounce.

Richard Hastings, a macro strategist at Global Hunter Securities, said gold could remain under pressure until there is more visibility into how the stock market is going to react to the fiscal cliff and if central bank purchases of gold will continue.

Sales of U.S. bullion coins continued to gain at the Mint on Wednesday, with numbers reflecting a shift in buying from silver to gold. American Silver Eagle Coins gained 28,000 ounces, a modest number compared only to the previous day’s 700,000 ounces sold. American Gold Eagle Coins, however, exhibited stronger sales with a rise of 11,500 from the prior day’s 7,000. American Buffalo Gold Coins gained 500 ounces.

Feng Liang, an analyst with GF Futures Co., said markets are being held hostage by progress on the fiscal cliff in the U.S. He added there are still bargain hunters for gold below $1,700 per troy ounce.

The political stalemating in Washington is oft-cited as a contributor to lack of movements in markets and there is evidence in recent days that some investors are taking the tack of sitting it out and waiting for more definitive policy language, despite the widespread expectation that a last minute deal with be reached with or without concessions.

This dynamic contributes to a decoupling between domestic physical demand and the most recent market movements. Investors continue to buy physical gold and silver on the dips, but bullion demand far exceeds bargain buying we’ve seen in recent months. End of year sales are a contributing factor, but not a causal factor, indicating physical demand is outpacing the market by strong factors with 79,500 American Gold Eagles and 528,000 American Silver Eagles moving at the Mint in the past week and a half.

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