For precious metals, this week has been more of a miss than anything else. We were not really given all that much economic data to mull over, and as a result spot values did not move very far in any one direction. What can be said, however, is that it is very clear that investor interest in metals is fading quickly with all this talk of raised interest rates in the US.
On the other hand, safe-haven demand will likely be kept afloat by the ongoing debt talks happening between Greece and IMF officials. As of now, very little progress has been made in the talks and it is not looking like that is going to change anytime soon.
Greece May Soon Face EU Exit
For much of the past week, we have been keeping a close eye on debt talks taking place between Greek government officials and officials from the EU and IMF. Though there are many issues needed to be discussed, the most pervasive is the issue of Greece not being able to afford current debt repayments without completely restructuring their financial system. The debt payments that were agreed upon a few years ago are too steep for Greece, though the IMF does not seem to care at all. The IMF and EU officials have made it clear that if Greece does not honor their debts, they will likely be forced out of the European Union.
For now, this situation is not have a major impact on the marketplace, but is one that can see its impact doubled in no time at all. Just this week, Greece’s central bank commanded that all state-owned entities commit their reserve cash to the bank. This is a clear sign that Greece is on the verge of a crippling cash crunch. For gold and silver, the turmoil surrounding Greece’s debts is a good thing simply because it has sparked a little bit of safe-haven demand. Unfortunately, more bearish outside market forces have effectively overridden any and all safe-haven purchases.
Attention Shifts to the Fed
As is the case almost every other week now, the market’s attention is beginning to shift to the Federal Reserve, which is supposed to have their April meeting next week. This week, however, a Wall Street Journal report indicated that two factors will influence when interest rates are hiked—the strength of the US Dollar, and the rate of global economic growth. A member of the Boston Federal Reserve more or less echoed these sentiments that very same day.
With the Fed’s meeting expected to take place over the course of 2 days next week, investors are already wondering what, if any, information will be divulged. As has been the case for the past few months, the market is more or less split on when they think rates will be hiked. There are some who think rate hikes will occur sometime during the Summer, but others still believe that we are not going to see rates boosted until sometime next year.
In the midst of all this Fed speculation, the market was dealt an existing home sales report from March that showed some upbeat data. This is the first time in many attempts that US economic data came back more upbeat than anything else. Of course, as you might have expected, this upbeat data fell into the monetary policy hawk camp as it is one more “clue” that rate hikes might be just around the corner. While next week is not necessarily expected to be the busiest week in recent history, it is sure to have plenty of action and information for investors to mull over and discuss.