Gold and silver made an end-of-week rally that has really surprised the marketplace. Though many investors were hoping for a bullish week for metals, the early parts of this most recent 5-day session did not bode well for either metal. That all began to change early in the day on Thursday when gold shot up almost instantly. Small gains were added on Friday and it seems as though gold will hold its position above the $1,260 threshold. Could metals be gearing up for an extended rally? Only time will tell.
Stocks Running Out of Gas?
Ever since US stocks declined to seemingly insurmountable lows in the late stages of 2009, it was always going to be a long and arduous process for equities to claw their way back to respectable levels. With that being said, the last 5 years have seen US equities slowly climb their way back to normal and even surpass levels many had thought would not be touched for decades. Over the past month or more we have seen a bullish run by US stock indexes that seemed to have had no end. Now, this week to be specific, it seems as though the air might be finally draining from the stock market balloon of the past 5 years.
Market analysts are not particularly shocked that stocks are beginning to cool off, especially with all the easy money we have gotten used to beginning to leave the marketplace. With more tapering a very likely possible outcome of next week’s FOMC policy meeting, there is no saying what the future has in store for US equities and thus equities from around the globe. With that being said, there is still an outside chance that recently sub-par economic data may force the Fed to hold off from tapering QE anymore than they already have. In December, the Federal Reserve Open Market Committee reduced the Fed’s monthly bond-buying from $85 billion to $75 billion. A report published earlier this week by the Wall Street Journal went on to claim that next week’s meeting will yield yet another $10 billion reduction which will see the bond-buying initiative shrink to $65 billion per month. With speculation abounding all investors can really do is sit and wait until the FOMC addresses the press after their meeting.
Gold, Silver Being Overlooked
For the past year or so there has been a very bearish outlook on precious metals, stemming from a plethora of different geopolitical and economic situations. Most pervasive of all those situation is and has been the tapering of QE. Most people familiar with the market prior to the first batch of tapering feared that a reduction to or ending of QE may boost the dollar and inevitably push precious metals downward. While this was true to some extent, the downward pressure being levied against gold and silver as a result of QE tapering was not as severe as some thought it might be and lasted a short amount of time.
Now, with stocks losing their momentum over the past couple days and the outlook on gold becoming brighter, it might be high time for precious metals to make a real rally. As of now, next week is already shaping up like it will be one of the most exciting 5-day session so far in 2014.