Precious metals are trading sideways today, but have performed very well this week thanks to a variety of factors working in their favor. Thursday saw metals make major leaps forward as worries with regard to the EU economy resurfaced after some time out of the headlines. While those worries have since calmed down a bit, the marketplace is still very much on edge and exhibiting a more risk averse attitude.
All Eyes on EU Bond Yields
Thanks to some downtrodden economic reports from various countries across Europe, yesterday saw EU and US stock markets sell off dramatically. The downward slides of world equity markets have lessened in intensity today, but traders are still very much on edge with regard to the strength of Europe’s economic and financial systems. Most unsettling of all is reports with regard to one of Portugal’s biggest banks being in serious trouble after its parent company missed scheduled debt payments. While the Portuguese prime minister was quick to quell investor worries, the wider marketplace could not help but have flashbacks to the sovereign debt crisis that plagued the continent for quite some time.
Bond market yields is where the market’s attention will shift as the world wants to gain as much insight as they possibly can into the status of the EU’s financial system. So long as bond yields stay at current levels things will remain calm and relatively orderly, but should bond yields rise like they did yesterday, we may see another day of all-out risk aversion.
As you could have probably guessed, this week’s poor economic data from Europe and subsequent equity market landslide proved beneficial for US treasuries, precious metals, and the US Dollar. In fact, the greenback is continuing to edge higher today, though only slightly.
Geopolitical Tensions Continue Aiding Metals
Despite attention shifting away from these issues for most of this week, the market is still concerned with the unrest and violence happening in Ukraine, Iraq, and Israel. The most recent of the three, the Israeli offensive aimed at Gaza, has been drawing the most attention as amateur videos of air and rocket attacks stream in from Palestinians and Israelis alike. There is no saying how long Israel plans on keeping up the offensive, but with threats being lobbed by both sides continuously, all signs are pointing towards these bouts of violence getting much worse before they calm down at all.
This week may have not offered all too much in the way of economic data, but what data it did offer ended up having a major impact on the precious metals market. Now, as gold and silver continue to trend higher, it will be interesting to see how far this rally can go.