Precious metals moved forward during the first week of 2016 trading mostly thanks to fresh geopolitical concerns from Asia and the Middle East. Jobs figures were another major talking point of the week, and the upbeat nature of the aforementioned bits of data ended up preventing precious metals from moving higher than they did. As we look ahead to next week, it is already clear that we will have a good bit of economic data to contend with from the US and elsewhere around the world. Not only will we be focusing on data from the month of December, but also year-end data that will hopefully give us a clearer pictures of how specific economies fared during 2015. While it is clearly evident that the US economy put forth a nice 2015 performance, the same cannot be said of many other major economic players.
Geopolitics Drives First Week of 2016 Trading
It has been some time since we have seen geopolitical events drive the direction of the global marketplace, but that is exactly what happened this week. First, the early parts of the week saw the eyes of the world shift to the Middle East, where Saudi Arabia announced that they would be officially cutting ties with Iran. This move was made in direct response to an incident involving Iranian protesters storming the Saudi embassy in Tehran. Iranian citizens were so outraged because Saudi Arabia had, just days earlier, put to death a leading Shiite cleric for having spoken out against the ruling family. Now, there are legitimate fears that this situation may evolve into more than just a diplomatic war.
Only days after the incident in the Middle East, the world was taken aback by claims from North Korea that the communist country had successfully tested a hydrogen bomb. For some insight, a hydrogen bomb is said to be anywhere from 50 to 100 times more powerful than the bombs dropped on Hiroshima and Nagasaki. While this was a big deal for sure, there are many questions with regard to the legitimacy of North Korea’s claims. Western intelligence claims that blasts were registered, but that they were no where near large enough to be hydrogen bombs.
It will be interesting to see how this situation unfolds as we move forward into the year.
Jobs Data Dominates
This week was a fairly slow week, but some employment data from the United States ended up causing a bit of a stir across the US and global marketplaces. First was the ADP private-sector jobs report that came out on Wednesday. This report showed that a healthy number of jobs were created during the last month of the year.
Two days after that, the US Department of Labor released their latest reading on December employment growth. The figure came in at more than 290,000 which makes 2015 one of the best years for job growth in the past decade. This was nice mostly due to the fact that employment has been strong for quite some time now. To put that statement in perspective, the last three months of 2015 saw and average of nearly 285,000 non-farm jobs created month after month. Expectations for job growth during any given month rarely exceed 220,000, so it is quite evident that the conclusion of 2015 was a great one for the US labor market. When the dust settled, however, the unemployment rate held steady at 5%.
For gold and silver, all of this fresh geopolitical unrest has been good for safe-haven demand. With that said, however, I am not so confident that geopolitical unrest alone will be enough to help precious metals sustain or even build upon these gains. As it stands, most market analysts are saying that gold and silver will continue to have a tough go of things mostly thanks to crude oil prices that are likely to continue declining.