By the time the first week of December trading came to a close, neither gold nor silver managed to move too far from where they started. Though this week was jam-packed with economic data, none of it was enough to too drastically move precious metals spot values nor the overall outlook on a precious metals investment. At present, the belief that interest rates in the United States will be raised for the first time in nearly ten years is forcing investors to turn their attention to other, interest-bearing assets. Essentially, the safe-haven, non-interest-bearing qualities of gold and silver are keeping investors at bay.
In addition to focus on the United States, investors also had some action from the European Central Bank to take note of. The ECB’s monthly policy meeting was held on Thursday, and the world tuned in in hopes of hearing of a monetary policy expansion.
Europe Extends QE
For much of this past year now, the EU has been pursuing Euro-devaluing tactics aimed at spurring economic growth. The belief behind this economic policy is that a cheaper Euro in relation to other currencies will not only boost exports, but will, on the whole, boost the strength of the whole European economy. After the onset of the 2008 financial crisis the United States pursued similar economic policies and those are the same policies that have been credited with bringing the US economy out of a recession.
Of course, the hope is that similar policies will have a similar effect in Europe. Up to this point, however, Europe’s version of Quantitative Easing has done more in the way of stabilizing the economy rather than spurring much of any substantial growth. Because of this, ECB president Mario Draghi announced on Thursday that, rather than expand QE, the region’s central bank is simply going to extend the policy to see what kind of impact that has going forward. Investors were surprised that QE in Europe was not expanded, but were content with the policy being extended. Now we play the waiting game to see if US economic policies can help the very different EU economic system.
Large Batch of US Economic Data Dealt
This week, being the first week of the month, played host to a good bit of economic data from the United States. Of all the data points that were delivered, few were more surprising than November’s ISM Manufacturing Index reading.
According to the Institute for Supply Management, November’s ISM Index reading was more than 3% lower than what it was in October. Finishing right around 56% in November, this reading still signaled growth in the manufacturing sector of the US economy. Having said that, however, the 3% drop cannot be ignored by the marketplace as it may suggest some sort of slowdown on the part of the US economy.
Following up Thursday’s ISM data was Friday’s payrolls report for the US for the month of November. Employment data in recent months has been generally upbeat, and this week was no different as it was reported that the US economy added roughly 211,000 non-farm jobs during November. This number fell about in line with expectations and only adds more credence to the belief that interest rates will be raised by the end of December.
The Federal Open Market Committee is expected to convene for their December meeting on the 15th and 16th of December, and you can expect that that meeting and accompanying post-meeting press conference will catch the undivided attention of the global marketplace. After all, interest rates in the US have been kept at near-0 levels for the better part of the past decade.