Precious metals are riding some poor US economic data to finish this week in positive fashion. In fact, the whole entire latter part of this trading week boded well for gold and silver thanks to a number of different factors. For this being a trading week smack dab in the middle of what is historically the slowest period of the year, gold and silver both did well to make gains, and surprised a lot of people in the process.
FOMC Meeting Comes and Goes
Though it was not as highly anticipated as meetings in the past, this week’s FOMC meeting did draw the attention of most global investors. No one was expecting the Fed to announce any changes to monetary policy, but everyone was hoping that some insight would be shed on what direction monetary policy will soon be heading. In other words, investors were hoping for some clue as to whether or not rates will be hiked again this year and, if they are, when that hike might come.
Unfortunately, apart from commenting about the strength of the US economy, Fed chair Janet Yellen offered little to no insight as to when interest rates might be moved. Though this meeting did not end up having much of an impact on the market, it did provide metals with a subtle boost.
US 2nd Quarter GDP Mostly Disappoints
Metals were given an additional boost on the final day of the week when it was reported that growth through the 2nd quarter of 2016 mostly missed the mark. Officially, the US economy grew by little more than 1% through the second 3-month sector of the year. Officially, the Commerce Department showed that the US economy grew by only 1.2%. This number was less than half of what most experts had forecast Q2 growth to be, and puts a damper on expectations that we will see any interest rate hikes before the end of December.
There were a host of factors dragging 2nd quarter GDP down, but something that stuck out more than anything else was investment in housing. Officially, housing investment fell by more than 6% on an annualized basis after moving upward by more than 7% during the first 3 months of the year.
While we could pick apart the GDP data all day, the fact of the matter is that this all basically translates into interest rates that are going to remain put for some time. This is something that plays in the favor of gold and silver, at least for the near-term.
BoJ Leaves Policy Unchanged
This whole week saw investors looking forward to the Bank of Japan policy meeting mainly because it was expected that they would expand their stimulus program. To make a long story short, the BoJ ended up concluding their 2-day policy without making any changes to policy. Though this did not necessarily lend itself to precious metals making larger gains, it did not detract from gains made on the day either.
As we look ahead to the week to come, it will be interesting to see if gold and silver can hang on to and even build upon this week’s gains. With the marketplace mostly quiet and very few developments making their way to center stage, there is a strong possibility that metals will continue to hold their position and possibly even make gains.
It will be interesting to see, as we begin the month of August, if the tone of investors will be one that expects interest rates to still be hiked, or if they will begin to come to terms with the fact that we may have to wait until 2017 to see interest rates modified at all.