Despite performing well for the past two or so weeks, both gold and silver are poised to post weekly losses after this 5-day trading session. In all, this week was not home to an overload of economic data, but did give us a few key reports worth mentioning.
The big focus of the week was on the release of the minutes from the FOMC’s most recent meeting. Seeing as the interest rate hike discussion is still going on, investors the world over were hoping that the minutes would provide some insight into what the Fed was thinking regarding rate hikes. We also saw a momentary focus on Greece, but with no debt repayments scheduled for them this week, attention paid to them was light in nature.
Looking ahead to next week, investors are already beginning to gear up for May’s installment of the FOMC meeting. At this point, however, most investors are fairly confident with regard to what will be, or won’t be, happening to interest rates in the near future.
ECB president Draghi Warns of Stagnation
In a speech made on Friday, European Central Bank president Mario Draghi called upon EU nations to reform their economies in the near future. Though he has made this plea before, the reasoning behind it is that with the way some countries’ economies are set up at present may prevent growth further down the line. With unemployment across the European Union only growing worse with each passing month, and investment in the economy at a minimum, any potential for growth is currently being negatively affected by the self-preserving ways EU countries are running their economies.
Basically, even though quantitative easing is happening in Europe, that monetary policy is only around to give European economies the time they need to better their specific economic situations. According to Mr. Draghi, “It should … be clear that the argument that accommodative monetary policy constitutes an excuse for governments and parliaments to postpone their reform efforts is incorrect.” Basically, Draghi is saying that QE has been instituted in order to give EU countries the time they need to reform their economies. Unfortunately, up to this point it does not seem as though any of these countries are trying to do anything to resolve lingering economic issues.
Despite an outlook on the wider EU economy that is better than we have seen at any other time since 2008, the EU’s problems are far from resolved.
FOMC Minutes More of a Miss
On Wednesday, the big news of the week unfolded in the form of the latest FOMC minutes being released. The minutes from April’s meeting have long been on the minds of investors who are eager to find out any information at all regarding potential rate hikes.
Of course, when the minutes were finally made public on Wednesday, they didn’t do much in the way of giving us information regarding interest rate hikes. In summation, the meeting’s minutes painted a picture of a Federal Reserve that is much more cautious now than they were a few months ago. In fact, some market experts are saying that the Fed seems more likely to institute easy money policies than raise interest rates. Thanks to this latest round of Fed news, the marketplace has now effectively been convinced that interest rates will remain put through the end of this year, and perhaps further than that. Though this news is bullish for precious metals, we have yet to see gold nor silver really capitalize on what the Fed’s minutes had to say.