Gold: $1,327.65 0.83
Silver: $15.92 0.01
December 9th Weekly Silver Market Update
Article By: Kyle Wanchalk on December 09th, 2016

Precious metals did not exactly go on a tear this week, but they prevented themselves from falling too much further. There was a good bit of economic data dealt, but in addition to that the marketplace was focused on the European Central Bank policy meeting, which was held on Thursday. As you could have probably guessed, the big attention-grabber at this point is going to be next week’s FOMC meeting. The reason for this, of course, is due to the fact that most everyone is anticipating that the FOMC will make a rate hike announcement; one that has been long anticipated. For gold and silver, this is not great news, but at the same time, it is mostly being shrugged off as the interest rate hike seems to have already been priced in by most investors. The question now becomes just how much are rates going to be hiked by.

ECB Reduces QE, Extends Program

The European Central Bank meeting is always hawked over by investors, but this time was a bit different because of potential policy changes that were, supposedly, going to be announced. In the lead-up to the ECB meeting, the prevailing belief was that Europe’s quantitative easing would see an end-date announced. There are many reasons as to why people believed this to be so, but seeing as the Euro appreciated in the early days of the week, it seemed as though most investors agreed with this sentiment.

Yesterday, however, there was no announcement marking the official conclusion of QE. Instead, we learned that the 80 billion euro asset-purchasing program will be reduced. Instead of the 80 billion euros being spent every month, the program will carry forward with 60 billion euros of assets being purchased monthly. In addition to this, the ECB announced a tentative end-date for QE; December 2017. With that being said, however, it is difficult to trust this date seeing as Mario Draghi made it very clear that, if at this time next year QE is still needed, the program can very easily be extended.

As a result of this announcement, the Euro currency trekked backwards against the Dollar. This, as you might have expected, did precious metals no favors at all.

US Economic Data Bolsters Rate Hike Expectations

Despite the fact that most investors have been convinced, for quite some time now, that an interest rate hike announcement is going to come along with next week’s FOMC meeting. These beliefs were given a further boost this week thanks to a continuation of positive US economic data.

First up was Monday’s release of the Institute for Supply Management’s Purchasing Manager’s Index reading on US non-manufacturing activities. According to the data, November’s PMI came in at a reading of 57.2%. This was more than 2% better than what was recorded in October. Being that the US economy is primarily comprised of non-manufacturing (ie. Services) activity, this upbeat report was music to the ears of monetary policy hawks who want to see rates hiked.

This reading was actually the best PMI reading we have seen since October of last year, which, in a way, proves how far the economy has come in that time. This did no favors for precious metals who lost value on the day and for a majority of the week.

Going forward, experts foresee the Dollar remaining strong throughout the immediate future. This is especially true if an interest rate hike announcement is, in fact, made next week. For gold and silver, this is not good news at all seeing as the Dollar and metals tend to have an inverse relationship more often than not. At this point, the only real big shock that the marketplace will face is in the event that the FOMC, for whatever reason, decides to keep interest rates put. No one thinks this is going to happen, so next week, though big, is not likely to yield much in the way of surprises.