Precious metals began the week in impressive fashion, but things quickly turned around as the Dollar and stocks picked up steam. A major theme of the week was the large quantity of economic data dealt from the United States. After seeing how precious metals performed on the week, it is clear to see that the tone of the economic data was overly positive.
With that being said, there is still a lot of uncertainty abounding in both the US and abroad. In the UK, there are concerns as to whether the nation is going to completely exit the EU as was originally the plan, or if they will retain some sort of special status, while only being partially removed. In the US, newly-inaugurated president Donald Trump is providing little insight as to what his plans are for his first days in office, and this is creating a bit of anxiety across the world.
Weekly Jobless Claims Back Down, Other Economic Data Dealt
After seeing an unexpectedly large uptick in the number of weekly jobless claims recorded last week, investors were always going to be concerned with what this week’s numbers would show. To the surprise of many, however, the number of first-time claims for unemployment benefits filed last week came back 15,000 fewer than what was recorded the week before. Having fallen by such a large tally, the new seasonally-adjusted average number of claims to 234,000. Being that expectations were for this number to be at or above 250,000, this was well-received.
Annual inflation figures for the United States were dealt this week and showed that inflation moved up by 2.1% during 2016. Normally, rising inflation would be a positive thing for precious metals, but in the current conditions it is not working out so cleanly. The reason being that if inflation is on the rise, the idea of interest rate hikes becomes increasingly plausible. As we all know, interest rate hikes are something that do not help spot values at all.
There were a few other pieces of economic data dealt this week, but the majority of them were upbeat in nature, which likely contributed to the slide by precious metals towards the end of the week.
Trump Uncertainty Supports Safe-Haven Demand
Another theme this week is the uncertainty that comes along with a Donald Trump presidency. Though we have heard all that President Trump said along the campaign trail, there is no one who knows for certain which plans he intends on pursuing, and which ones were nothing more than conveniently-placed campaign slogans.
The fact that no one is quite sure what Trump in the Oval Office means for the US and the world, investors have been more recently flocking to precious metals. Putting a dent in that safe-haven demand this week, however, was a speech made by Janet Yellen where she alluded to the fact that interest rate hikes this year are almost inevitable. As has been the case for a long time now, she basically reiterated that so long as the US economy continues to improve at the rate which it has, there will assuredly be a need to boost interest rates further. All of this is something that put pressure on gold and silver. For that reason and so many more, it is almost impossible to tell for sure what the near-term and long-term futures hold for gold and silver spot values. On one hand, a lot of uncertainty abounds and that helps precious metals, but on the other hand the US economy’s strong performance is undermining the support metals might be receiving from safe-haven demand.