Gold and silver spent most of the week on the decline, but ended up stabilizing a bit by Friday afternoon. All told, spot gold has fallen nearly $100 in a little less than 2 weeks while silver has declined by more than a dollar over the same course of time. The general lack of new fundamental inputs forced investors to focus on other factors that are currently weighing on their investing decisions. With gold sitting at a 6-week low currently, the real question is whether or not lower spot values will translate into an increased number of bargain-hunters buying up physical gold and silver.
Metals Decline Amid A Quieter Marketplace
Apart from some minor economic reports being released during the week’s early stages, the market really didn’t have any major US economic news to focus its attention on. Because of this, investors began focusing more readily on statements made by Janet Yellen while speaking to media a little more than a week ago. In her comments the newly appointed chair of the Federal Reserve talked about the ending of QE by the end of this year and the potential raising of interest rates as soon as next spring. The market has been expecting QE to be done away with by year’s end for some time now, but rising interest rates were not expected to be an occurrence until much later than next spring.
The thought of rising interest rates being barely more than a year away has scared some investors away from precious metals. You see, when interest rates are high, so too are the opportunity costs of holding safe-haven gold and silver in lieu of other, more profitable investments. Though it is by no means a guarantee that interest rates will be risen by this time next year, it is something for investors to consider before making any long-term investments.
James Bullard, president of the St. Louis Federal Reserve bank chimed in this week with statements of his own, most of which touted the strength of the US economy and his expectations for a lowered overall unemployment rate.
A lot of people are expecting bargain-hunting buyers to hit the marketplace this weekend, but with gold and silver’s price movements as volatile as they have been over the past two weeks, I wouldn’t be surprised if most people simply stayed away from metals until they get a better idea of just where they will head next.