Gold posted a weekly loss for the first time in a month and a half as both gold and silver ended the week in disappointing fashion. In all, the last 5 days have been considerably turbulent not only for precious metals investors but all investors in general. On Wednesday it was announced that the FOMC would follow through with another $10 billion reduction to QE, bringing monthly bond-buying by the United States’ central bank down to $65 billion. The threat of more tapering unnerved periphery currencies during the early stages of this 5-day session, but emergency central bank policy meetings did their job in alleviating the threat of a complete and total sell off of emerging market currencies.
Fed Tapers, USD Wins
When it was announced on Wednesday that QE would be further reduced, gold and silver instantaneously received a modest boost. In turn, US stocks took a nosedive, as did periphery currencies from places like South Africa and Turkey. A day later, however, stocks had regained some balance and so too did the once ailing currencies. Today these same markets continue to be holding steady, but are going to continue to be sensitive to any and all market activity. Even though the lack of easy money will definitely continue to pressure both equities and currencies, the lasting impact may not be as significant as once thought. This means that gold and silver may not see the large boost that many had originally thought they might.
What is more or less for certain is the fact that the USD has definitely benefited from the Fed’s decision to taper QE by a larger margin. With less money circulating around the marketplace it only makes sense that the value of the greenback would rise. As we head into next week it will be interesting to see just how well the Dollar will do.
Despite the USD being on a tear over the course of the past few days, gold and silver have shown isolated signs of strength. In fact, gold eclipsed the $1,270 threshold at two separate occasions this week. Unfortunately for metals, and all commodities for that matter, the recent form of the Chinese economy is preventing any solid gains from being made. Seeing as the Chinese are the world’s largest consumers of raw commodities, an economic slowdown in the country and region will mean for more pressure being levied against gold and silver. The Chinese are currently celebrating the Lunar New Year, but investors will hope for better economic data once Chinese investors head back to work sometime later next week.
Next week will be a big session for US economic data, the likes of which will have people either praising the Fed’s decision or touting it as another premature decision.