Precious metals are holding steady to slightly lower to close out this first full 5-day trading session of October. In truth, there wasn’t all that much economic data brought to the table, but what little data was made public definitely had its impact on the US and global marketplace. For the first time in more than a month, it is looking like spot gold and silver will be heading into the weekend having posted a weekly gain. While the market is still quite bearish, the volatility in equity markets coupled with the content of the FOMC’s minutes have helped drive forward safe-haven demand for gold and silver.
In news from Europe, we received data that is equally poor, if not poorer, than what we have seen over the past few months. According to a report out of Germany, German factory output during August declined by more than 4%. Though everyone was anticipating a factory output decline, no one in their right mind was anticipating that the data would take such a drastic downturn. There were a few other pieces of economic data made public out of the EU this week, but they too were poor and really discouraging. Now, the eyes of the world remain fixated on the European Central Bank as it is widely believed that they will need to do something, and do something soon, in order to stave of rising deflationary pressures and a generally weakening regional economy.
For a bit of last week and throughout much of this week, US equity markets have been jumping all over the place; finishing in elevated positions one day while declining drastically the next. Though no one can finger why we are seeing such volatility, many believe that this is a sign that the equity rally in the United States may finally be coming to an end. Even today, the markets are showing mixed results and are not moving in any one direction. Because of this volatility, safe-haven demand for precious metals has been given a noticeable boost. Aiding this growing safe-haven demand are incredibly downtrodden spot values such that investors simply can’t resist getting their hands on some physical gold and silver.
Not helping equity markets at all was a mid-week FOMC minutes release that painted a picture of a Federal Reserve that is still hesitant to enact interest rate hikes. Members of the Fed cited weakening global economies as a major reason why the Fed cannot be so quick to raise rates. Despite marked improvement on the part of the US labor market, there are still many other factors preventing the Fed from jumping on the rate hike bandwagon. Now, most experts are expecting rate hikes to happen sometime next Fall, as opposed to previous projections which held that rate hikes would happen early on in the summer of 2015. It will be interesting to see, over the coming weeks, just how European and US economic data is perceived by the market. At present, the US economy is doing well, but the European economy is doing incredibly poorly. If that doesn’t change soon, rate hikes may be pushed back even further.