Precious metals had a pretty terrible week thanks to pressure coming from basically all angles. The biggest happenings of the week came in the form of various employment reports from the United States. In total, these reports were mostly upbeat and did well to convince even more people that the Fed will, indeed, make a rate hike announcement this month.
Something else we noticed this week, and also something that tied into the upbeat employment data, was that the US Dollar managed to make gains at almost every turn. While a few weeks ago a stronger Dollar was not having much of any impact on precious metals, that has changed and the normal inverse relationship has taken hold.
Though it was not necessarily a main focus, investors did direct their attention to the monthly policy meeting of the European Central Bank, which was held on Thursday. In the lead-up to the meeting, there were very few people expecting to hear anything in the way of a policy shift. With that much being said, the market was paying attention in order to find out what, if anything, ECB president Mario Draghi had to say about the future of the Eurozone’s monetary policy.
In a way, investors and market-watchers got exactly what they were hoping for as Draghi commented upon how he (and his colleagues) feel as though deflation is no longer a major concern for the region. He went into more detail, but Draghi alluded that the super loose policies currently employed by the ECB might need to be rolled back, perhaps sooner than later. Though he didn’t go into detail as to when policies will be altered, he made it clear that they should be altered sometime in the not so distant future.
Other than the ECB meeting, the primary focus for investors both in the US and elsewhere was the batch of employment data that was to be dealt this week. The data got started with a bang in the form of the ADP private-sector jobs growth report. For some background, the ADP report is hardly ever viewed as a major piece of data, but is often used as a barometer for what to expect from the Labor Department’s non-farms report.
Once Wednesday rolled around, investors were shocked to see that ADP reported that just shy of 300,000 (298,000) new jobs were added to the private sector in February. When you take into consideration the fact that no one was anticipating to see anything above 200,000 private-sector jobs created during February, the data was overly positive.
On Thursday, the data was not quite as upbeat as the weekly jobless claims data showed an increase of 20,000 more people filing for first-time unemployment benefits. This rise, while somewhat large, was largely ignored as the seasonally-adjusted average number of unemployment claims remains well below the all-important 300,000 threshold.
Finally, Friday brought about the US Labor Department’s reading on non-farm jobs growth. Like the ADP report, expectations called for about 200,000 non-farm jobs to have been created during February. The actual data showed that about 235,000 jobs had been created, and that was enough to ensure gold and silver’s weekly losses. Now, the attention of the marketplace will quickly shift to next week’s two-day FOMC meeting. At this juncture, a majority of the investing world is anticipating that the Fed will announce a further increase to the baseline interest rate range in the US.
Having said that, if a rate hike announcement is not made at next week’s meeting, gold and silver are more than likely going to shoot out of a rocket. Having already been priced in, the lack of a rate hike announcement would (in all likelihood) shoot metals back up to where they were at a few weeks ago. All things considered, next week is going to be very interesting.