At almost every turn this week, precious metals performed extremely well thanks to most underlying factors coming to their aid. One of the biggest news stories of the week was the FOMC meeting that took place over the course of Tuesday into Wednesday, but it did not end up providing much of anything that wasn’t already expected by investors.
Another story making headlines all week long was that of the United Kingdom’s potential pending exit from the European Union. This potential has a lot of investors worried, and this worry is just one more factor playing into the hands of the precious metals bulls. Looking ahead to next week, I am anticipating that we will continue to see speculation regarding the UK’s future and what that might mean for the marketplace both in Europe and around the world.
FOMC Meeting Brings About No Policy Changes
If you were to have witnessed the marketplace 14 days ago, this week’s FOMC meeting was all anybody could talk about. Back then, it was widely believed that the Federal Reserve would move to raise interest rates by this past Wednesday. What’s more, investors were convinced that the interest rate rises would continue into July so that we would see two consecutive months of raises. From 2 weeks ago, to the beginning of this week, the allure of the FOMC meeting had almost vanished as it was widely believed that interest rates would not be touched. In fact, there are now very few people who think rates will be risen in July.
On Wednesday, gold and silver were given a slight boost because of the Fed’s lack of policy change, but gains were not anything to write home about because maintaining current interest rate levels was exactly what most people had eventually come to expect. Still, the fact that the outlook on rate hikes is growing increasingly bleak, gold and silver’s momentum is only expected to grow.
In the immediate wake of the FOMC and its lackluster outcome, the attention of the global marketplace instantly shifted to the pending referendum vote that will be partaken in by the United Kingdom. This referendum will determine whether the UK remains an active member of the European Union, or if they will depart the EU to forge their own path. The reason this is such a big deal for global investors is due to the fact that no one knows what a BRExit will mean for the European nor the global economies.
For gold and silver, this abounding uncertainty has its benefits, because it has thus far driven safe-haven demand upward day after day. In fact, other than small losses incurred towards the end of the week, gold and silver posted gains every single day. Unfortunately, however, small losses incurred on Thursday were due to strong, creditworthy rumors that the referendum is going to be postponed by a few weeks. This simple rumor had the strength to take some of the safe-haven momentum away from precious metals.
Something else that will be called into focus next week is the weekly jobless claims report. This week’s report showed that more than 13,000 new first-time claims for unemployment benefits were filed than the week before. This is unnerving, especially for the people closely watching interest rates, because the strength of employment data will determine just how soon, and by how much, interest rates will be raised. As it stands now, most polled experts anticipate that we may only see one more interest rate hike before the year’s end. This is a far cry from the slew of hikes that were expected to have happened when experts were polled a year or more ago.