Gold and silver are hovering at about even on Friday after what has been a week of ups and downs. Though there were not as many economic reports released this week as there were last week, investors had plenty to keep them busy. Next week’s FOMC policy meeting has been the number one topic of conversation this week as investors and market experts alike have been speculating with regard to the exact timing of the tapering of QE.
In other news this week, a bipartisan budget deal reached by U S lawmakers caught some by surprise, but did not have the type of affect on the US marketplace as many probably thought it would.
Surprising Budget Deal Helps Avoid 2nd Shutdown
The government shutdown that occurred towards the beginning of this past October has been out of the news for the past few months now, but it was on the verge of making a reappearance. That is until US lawmakers put their differences aside this week and pieced together a permanent budget deal for the remainder of this government year. Contrary to popular belief, the budget agreement that ended the first government was not a permanent one, but rather a temporary band-aid. The deal reached towards the middle of October was set to expire in mid-January, meaning that we have been fast-approaching yet another government shutdown.
Now, concern regarding another possible government shutdown has disappeared from the geopolitical atmosphere and has caused investors to exhibit more of a risk-on attitude. This means that the falling gold and silver spot values we have seen over the course of the past few weeks is likely not going to change anytime soon.
Another possible result of the bipartisan budget deal is that the FOMC may have even more reason to reduce Quantitative Easing at next week’s meeting. Recently strong economic data coupled with a calmer geopolitical atmosphere in the United States may be the just what the FOMC wants to see before tapering. Regardless of whether a tapering announcement is made next week or sometime in 2014’s first quarter, the impact it will have on the precious metals market is not as large as once thought. This is the case because the marketplace is now expecting to hear a tapering announcement. Because a tapering announcement, whenever it is made, will not come as a huge surprise to investors, the likelihood that it will cause the values of gold and silver to take a dramatic dive is not nearly as high as it once was. Many market experts believe both gold and silver spot values have already more or less factored in reduced QE into their current values. If this is actually the case, then a tapering announcement being made next week will likely not have that big of an impact on the precious metals market.
Nonetheless, investors the world over will be interested to see what the outcome, if any, of next week’s FOMC meeting will be.