Though we are only 2 weeks into the New Year, it is clear to see that investors are much more bullish on precious metals now than at any point in the last few months. The reasons for this are many, but in essence, there is an extreme level of uncertainty abounding across the global marketplace, and for this reason gold and silver are seeming like increasingly appealing investment options. On the whole, this week played host to quite a bit of economic data as well as a number of global economic developments that are definitely worth paying attention to.
From Europe especially, the market was dealt a large amount of economic data and played host to a number of big developments. This is especially interesting considering the European Central Bank is holding their monthly policy meeting next week, and a major announcement is expected to be made. All in all, next week is more than likely going to be just as busy as this week was.
Big Developments Across Europe
Throughout this week the market was dealt story after story from the European Union, and most of them greatly altered the overall investor outlook on the region. For one, on Wednesday, the European Court of Justice ruled that the European Central Bank’s plans to institute quantitative easing are within the realm of the law. Perhaps more important is the fact that the ECJ’s ruling set forth that the ECB is allowed to pursue policies that are unusual so long as they are fully explained to the public.
As a result of the ECJ’s decision, it is now expected by almost everyone that the European Central Bank will announce a monetary policy shift as a result of next Thursday meeting. Though many people had already thought that the ECB was going to be making an announcement next week, this week’s ruling more or less confirmed this belief.
In other news from Europe, it was reported on Thursday that the Swiss National Bank decided to unpeg their country’s currency from the Euro. Back in 2011, the Swiss decided to peg the Franc with the Euro in an attempt to stave off extreme appreciation of the currency. Now, however, the Euro is in a state of free-fall, so it shouldn’t come as much of a surprise that the SNB decided to jump ship. Though the move may be unsurprising, the initial announcement sent a shock across the global marketplace and saw equity markets, financial markets, and currency markets from across the world take a downward turn.
For the Franc, however, yesterday’s SNB decision prompted the currency to tick upward by more than 20%. The news also did precious metals favors as the increased level of uncertainty on the part of investors drove more people to safe-haven investments in gold and silver.
Fed May Be Forced to Hold Off on Rate Hikes
The big takeaway from this week’s economic action is that the Fed very well may be forced to hold off on hiking interest rates for some time. With so much uncertainty abounding across the global marketplace, most experts say that the Fed would be making a mistake to raise interest rates so quickly. Further, these same experts pointed to deflation concerns as well as the declining price of crude oil as the main reasons behind why a rate hike will likely not be coming any time soon.
This news is also great for precious metals because with so many investors unsure of what to do with their investing monies, the appeal of gold and silver as alternative investments is constantly growing. As we head into the third full week of January trading, I anticipate that things will be just as busy, if not busier, than they were this week.