Gold and silver are finishing off the week in disappointing fashion as a result of a keener appetite for risk exhibited by world investors. Now, as US stocks and the US Dollar continue to add value, it will be interesting to see what direction metals head in. Though there are a number of geopolitical events ongoing, none of them have had the strength to help metals add any significant value. Even when value was added by precious metals, like we saw happen a few times during this 5-day trading session, they are not able to retain even the smallest gains. With the spot value of gold once more below the $1,300 threshold, and silver trading well below $20/ounce, there is no saying if or when things will correct themselves.
Rallying Stocks, Dollar Put Pressure on Metals
Before US markets even opened on Friday, gold and silver spot values were declining rapidly due to an uptick in the value of the US Dollar as well as US equities. As of the writing of this post, the Nasdaq and S&P were back to trading near the all-tie highs reached little more than a month ago. Making matters worse, once futures markets opened, spot values were driven eve further downward due to the triggering of sell-stop orders.
Also not helping precious metals is the fact that the US Dollar is trading near a 6.5 month high. Over the course of the last month and a half or so, the greenback has been seen adding value at seemingly every turn. So long as the Euro currency and the British Pound continue to lose value, there is no reason why the Dollar should continue adding value. It will be interesting to see how the duration of this year plays out for the Dollar, though many are under the impression that even more gains are on the horizon.
Geopolitics Consumes Market’s Attention
Apart from the limited economic data made public this week, the market was also preoccupied with the wide array of geopolitical conflicts happening around the world. Most notable this week was a story centering around a Russian humanitarian aid convoy headed from Moscow to Ukraine. During the early parts of the week, the widely held belief was that the convoy was headed for the besieged Ukrainian city of Luhansk. Though Luhansk has been without electricity and water for more than 10 days now, the convoy has supposedly not been inspected by the Red Cross and, as such, Ukraine has said that it will not allow the convoy to cross the border.
The convoy has yet to reach the Ukrainian border, but its crossing is imminent. It will be interesting to see if, over the weekend, Ukrainian forces allow the convoy to cross the border, or if they will take action to prevent it from doing so. While this situation stands the chance of driving safe-haven demand for precious metals, it is looking much more like the market will more or less ignore this situation. That is, of course, so long as things remain calm when the convoy reaches the border.