The last few days of this week have seen precious metals make some solid, consistent gains such that the week is not a total loss. In fact, this will be the first time in about a month where both gold and silver spot values finished the week in better standing than where they began. The early parts of this week’s trading session were quiet, but investors still had plenty to pay attention to. For one, Janet Yellen, Fed chairperson, delivered two testimonies to Congress regarding the stature of the US economy as well as the future of interest rates.
In addition to this, we were also given plenty of information to pay attention to from Europe. With that said, however, much of the focus on Europe has subsided as things have really calmed down in that part of the world through this week.
Yellen Addresses Congress, Offers Very Little Fresh Information
The chairperson of the Federal Reserve, now Janet Yellen, is always tasked with delivering a testimony to Congress regarding interest rates twice a year. This week marked the first of two semi-annual addresses to Congress. Yellen’s remarks were delivered over a two day period spanning Tuesday and Wednesday, though what she had to say on Wednesday did not vary greatly from what was said on Tuesday.
To give a quick summary, Yellen maintained that while the US economy is continuing to show marked signs of improvement, there are still a number of factors that may prevent the robust growth that is expected from happening. Tying into all this uncertainty is the interest rate discussion, which Yellen said will continue to take place on a meeting to meeting basis. As far as interest rate hikes are concerned, Yellen did not offer much of any new information. As a result of this, the market determined that Yellen’s statements were more dovish than anything else. Now, the overriding belief is that interest rates in the US will remain at current levels for the foreseeable future; in other words, until sometime during 2016. For precious metals, the fact that interest rate hikes are not coming anytime soon has acted as a bit of underlying support in recent days.
Gold Demand In India Muted…For Now
The demand for gold in India has suffered greatly over the past year or more thanks to a stiff tariff imposed on all imported gold. Being a country that purchases thousands of ounces of gold every year, the fact that Indians have been demanding less of the metal has translated into a situation where the wider precious metals market has been noticeably negatively affected.
Luckily, there are rumors that the import duty on foreign gold may soon be relaxed such that acquiring gold will become much cheaper for the average Indian citizen. If the tariff is reduced, this may be another underlying bullish factor for metals as it will undoubtedly mean more physical purchases of the yellow metal in India, a country with a population of over 1.2 billion.
We will continue to keep a close eye on this situation in order to see if, in fact, the tariff on gold imports will be reduced.
Looking ahead to next week, I anticipate that the market will be dealt a good bit of month-end economic data from the US and elsewhere around the world. This is sure to impact the precious metals market in some regard, but there is no saying whether this means gains or losses.