Precious metals had a decent week as midweek gains are looking like they will be able to take both gold and silver into the weekend reflecting on gains. With that being said, losses incurred towards the end of the day on Friday really minimized weekly gains. This week was eventful for a number of different reasons, but the fact of the matter is that Thursday’s European Central Bank meeting took the cake when it comes to what investors deemed as being most important.
Crude oil was back and forth all week, though at this point this is something we have grown accustomed to.
ECB Meeting Yields No Policy Shifts
Perhaps the biggest happening of the week came Thursday in the form of the most recent European Central Bank meeting. This meeting is always important in the eyes of investors, but in recent months has been even more attention-grabbing due to the fact that European economic data, and the European economy as a whole, has been struggling to put forth anything positive.
Yesterday, though no shifts were made to monetary policy, ECB president Mario Draghi maintained that an expansion of current QE efforts is something that remains part of the plan. What’s more, Draghi commented, saying that interest rates across the region will remain at current or lower levels throughout the foreseeable future. Since just before the beginning of the year, the European Union has been part of an asset-purchasing program that sees the region’s central bank purchase bonds and other assets in order to pump more money into the economic system. In theory, this practice will devalue the Euro currency and encourage spending/lending. Up to this point we have not seen QE be overly effective, but the ECB feels as though it should be continued.
Rounding out the important comments was one made by Draghi when he said that the level of interest rates and the size of the asset-purchasing program were not directly tied. The point he was trying to make was that even though interest rates may move lower, that does not mean that the QE plan will be at all altered. In the same breath, even if QE is expanded, this does not mean that interest rates will be moved at all. Up until this point many people were under the very believable impression that the two were directly correlated.
Even though Europe is still far from being out of the woods, many investors and market analysts alike are encourage that QE will work for Europe just like it did the United States. Even with all this said, there is a general agreement that the overall rate of inflation will not hit the ECB’s 2% target by year’s end. In fact, many people don’t think that inflation will even come close to that mark.
Other, Miscellaneous News
To start off the week, crude oil prices were being propped up by the fact that Kuwaiti oil-workers were on a strike. This strike, which had to do with promised reforms, did well to cut the region’s daily oil production slightly and ended up giving the spot value of crude a psychological lift. Unfortunately, the strike only last three days and workers were back to their posts by Wednesday. As you might have guessed, crude oil began falling shortly after word broke that the strike had been called to an end.
There was a batch of weak housing data dealt during the middle of the week, and it seems as though we are beginning to see prospective home-buyers in the US second guess their eagerness to purchase a home thanks to increasingly worrisome economic conditions at home and abroad. Though still strong, the US housing market has come under some scrutiny recently for not performing as well as expected through the first 3 or more months of the year.