Precious metals ended this week poorly, which is surprising considering the tone of economic data from the United States. Even though precious metals finished the week poorly, the near-term future still remains bright, or so it would seem. The tone of economic data from most parts of the world, the US included, has been downbeat and in form that has really proven to be par for the course for how this year has gone. This is something that has beaten stocks down recently, and is also something that plays in the favor of precious metals.
On the other hand, there are some potential looming factors that very much work against precious metals. For one, there is the potential for the US Federal Reserve to hike interest rates again, something that would make it more expensive to hold gold and silver than it is currently.
Japanese Easing Concerns
One of the big threats to the prospects of precious metals is the fact that the Bank of Japan is currently considering providing even more monetary stimulus to their economy. Though Japan has already instituted easing policies, the effects are not being felt as many had thought they might be, and some feel as though this is due to easy money not being easy enough. As such, the BoJ in conjunction with Japan’s finance minister have made it known that more stimulus may be on the way.
If this does prove to come true, the US Dollar will more than likely gain significant value. Naturally, the Dollar doing well would be something that weighs on precious metals’ spot values. While the idea of more monetary stimulus in Japan is a very real one, there is no concrete clues that it will take place anytime within the next few months, especially with the amount of backlash Japan is receiving from the international community for even considering lowering the value of the yen further.
Weekly Jobless Claims Tick Upward Again
For the second week in a row, claims for unemployment benefits have risen by what some would label dramatic margins. In fact, this week’s reports showed that roughly 20,000 additional claims for unemployment benefits were received last week. Now, the seasonal adjusted average sits at 294,000 and eerily close to the 300,000 threshold.
On its face, this report may not seem like the first one for investors to overlook. After all, the US job market has been one of the few things that continues to thrive despite signs of weakness elsewhere. When you dig deeper, however, you may discover that things are not always as they seem.
This is so because the tick upward in jobless claims is explained due to the recent Spring Break recognized by New York City public schools. Due to the strange laws governing unemployment benefits in the United States, non-teacher employees are allowed to temporarily claim unemployment benefits during these types of breaks. Being that there is a lag between when benefits are received and when they are processed, this is how analysts are explaining away the last two weeks’ worth of jobless claims data.
It will be interesting to see what comes around towards the end of next week. If next week’s weekly jobless claims report echoes this week’s, I am quite sure the marketplace will be taken aback. This is especially true because the explanations offered for these past two weeks has been generally accepted by investors the world over.
Still, at the end of the day, it is difficult to say for certain what the immediate future holds for the prospects of gold and silver. Most signs indicate that spot values should be going up, but that simply has not been the case this week.