For gold and silver, the last 5 days proved to be beneficial as spot values finished Friday a bit higher than where they started on Monday. There was a lot for investors to pay attention to, but in the same breath it must be mentioned that many of the same factors were talked about all throughout the week. Geopolitics were not as much of a factor this 5-day trading session as they were the previous two, but there was still a lot to talk about, especially as it relates to the possibility of further European economic stimulus.
A major winter storm is now bearing down on the East coast, and it will be interesting to see what, if any, impact it has on the markets come Monday. With some people expecting up to two feet or more of snow, I would not be at all surprised to see a slow start to next week.
ECB Ponders More Stimulus
In the wake of a meeting this week, the European Central Bank attempted to answer the question many investors have. That question is, when will more stimulus be announced? Currently pursuing quantitative easing measures none too dissimilar from those pursued by the United States not very long ago, many investors have been anticipating for some time now that the devaluing of the euro on the part of the ECB would be increased. Once again, however, those expectations were dashed as the president of Europe’s central bank, Mario Draghi, made it clear that nothing was being changed to monetary policy.
With that being said, Draghi left the door open to further stimulus in the future. So long as global economic conditions permit, he and his colleagues made it clear that stimulus is on the table. However, with crude oil’s weakness and China performing at its lowest rate in years, it does not seem like quantitative easing measures in Europe are going to be intensified anytime soon.
IMF Reduces Global Growth Expectations
The International Monetary Fund announced earlier this week that it would be downgrading its expected annual growth rate of the global economy. According to a statement, the IMF is now expecting the global economy to grow by 3.4% by year’s end. For some, this was interpreted as good news because the 3.4% mark bests 2015’s expectation, which was 3.1%.
With that in mind, this week’s announcement was a downgrade, and the IMF officially downgraded their expectation by .2%. Back in October, the IMF announced that the global economy was going to grow by 3.6%, and this shocked a lot of people for all the right reasons. Even though 3.4% is a nice pace of growth, it is still disappointing to see forecasts downgraded.
As we look ahead to next week, the biggest focus for investors will be the price action of crude oil. The leading commodity dipped even lower this week and the future does not look like it will be much better. This will remain especially true so long as Iranian crude oil is expected to be shipped to new markets in the near future. For gold and silver, the poor performance of crude oil is never good news, but the anxiety it is creating across the global economy has spurred a bit of safe-haven demand in recent weeks. Should safe-haven demand pick up even more over the next few trading sessions, gold and silver may be able to ascend to heights not seen in months. That much, however, remains to be seen at this juncture.