Precious metals are posting gains today to close out the week, but are still looking like they are in a rough spot. There was a good bit of economic data made public this week, and as you probably could have guessed, it had a nice impact on the global marketplace. In addition, we received a good bit of information on the US interest rate discussion, and it did not favor precious metals at all.
Now, a major theme in the marketplace is the fact that so many people believe crude oil has put in a market bottom while the USD has put in a market top. If this is the case, that will make for an interesting next few weeks for both the domestic and global economies. Looking ahead to next week, I expect investors to begin speculating with regard to what the FOMC will say at their upcoming April meeting.
Greece Debt Talks Progressing Slowly
After being out of the news for a month or so, Greece and their ongoing debt negotiations with European nations are back on the front-burner of the market’s attention. The talks, which involve Greece, the International Monetary Fund, and European Union officials, have been moving along slowly and it is being reported that no one is seeing eye to eye.
This week, Greece reportedly asked the IMF if they can delay a scheduled debt payment, at which point the IMF immediately refused. Though talks have since been put into recess, officials will be meeting again on Saturday to continue their discussions. As a result of the reported stagnation of the ongoing debt talks, Greek bond yields have risen dramatically due to a growing belief that Greece won’t be able to stay true to its debt commitments. As we head into next week, it will be interesting to see how Greece and their debtors handle what has become a tense situation.
Movements on the Interest Rate Hike Front
Another big theme in the marketplace this week has been ongoing discussions and speculations regarding when and by how much interest rates will be hiked. Earlier in the week, St. Louis Fed chairman James Bullard spoke about the US economy, and what he had to say was somewhat interesting.
In his remarks, Bullard made it clear that he thinks interest rate hikes should take place sooner rather than later. He continued by saying that he expects the US economy to move forward at a steady 3% rate of growth will also expecting the overall unemployment rate to dip into the 4% range. His comments effectively switched the thought processes of many investors and has some convinced, once again, that rate hikes might be taking place this summer.
On Thursday, a Philadelphia Federal Reserve business survey came back much better than expected. This too only adds fuel to the fire of speculation that holds interest rates will be hiked before the end of this year. For precious metals, this is not good news at all because higher interest rates will mean that investors will be prompted to seek out interest-bearing assets as opposed to those that safeguard against uncertainty and do not pay any interest…eg. Precious metals. As the year moves forward, we will continue to keep a close eye on the interest rate discussion as I anticipate that it will heat up considerably before long. With the April FOMC meeting just around the corner, I am also expecting that the next few weeks will be quite busy for investors, market watchers, and everyone else.