Gold and silver are trading lower on Friday and are currently slightly lower than where they both began the week. Significantly better performing US stocks are putting a lot of pressure on gold and silver, compounded by the fact that buying interest in Asia has dropped off significantly due to a decreased valuation of the Chinese Yuan.
While there are still definitely some factors working in precious metals’ favor, more recently the tables have begun to turn and really show the potential downsides of buying too heavily too quickly.
Some Factors Working Against Gold and Silver This Week
Rising interest rates and US stock indexes hitting multi-month highs were two major factors working against interest in safe-haven gold and silver. The US Dollar is also being put under some pressure today and will more than likely prevent gold and silver from falling too far in value. While the USD is feeling a bit of pressure on Friday, the Chinese Yuan is in a much more dire situation. The value of the Yuan has fallen dramatically over the past few days, making it even pricier for Chinese investors to purchase dollar-denominated gold and silver. Chinese investors buy more physical gold and silver than anyone else in the world on an annual basis, making the declining Yuan of particular importance to investors worldwide.
It will be interesting to see what, if anything, the central bank of China does to combat their currency’s steep decline.
Civil Unrest In Ukraine, Thailand Continues
Despite Ukraine’s president fleeing from office and the state of the financial system in the nation on the verge of collapse, many are still holding out hope for Ukraine. The EU stepped in and provided some financial support this week, though it is going to take a lot more than money to see Ukraine through this situation. Russian nationalists are beginning to express themselves in parts of the country historically loyal to Russia. Yesterday, armed men seized two airports in Ukraine’s Crimea region as the world is watching the nation’s stability deteriorate rapidly.
A lot of people are blaming this most recent flare up in violence on Russia, claiming the Russians have more at stake in Ukraine, specifically parts of the country adjacent to the Black Sea, than the world is caring to admit. This ongoing situation is driving safe-haven demand for gold and silver and will continue to do so until a resolution is reached. It will be interesting to see what direction the situation in Ukraine heads in over the weekend.