Gold and silver are both trading sharply higher to start the day on Friday, mostly fueled by safe-haven demand heading into what is looking more and more like an important weekend for the crisis in Ukraine. There were few pieces of US economic data due out this week and what little data the marketplace caught wind of was mostly overshadowed by rising tensions in Ukraine.
Earlier in the week, however, a few manufacturing PMIs were released and mulled over by the marketplace. China’s April manufacturing PMI was down in comparison to March and is still at a level that suggests its manufacturing sector is contracting. The Chinese central bank made some stimulus moves by reducing the reserve requirement ratios of more rural banks, but the affect that these most recent monetary policy changes will have will only be realized a few months down the road. In Europe, the EU’s April manufacturing PMI came back better than March’s reading and only worked to confirm the widespread belief that many of Europe’s once financially and economically deteriorating nations are now back on track.
Crisis In Ukraine Deteriorating Rapidly
The unrest and, more recently, violence in Ukraine has been in and out of the news for the last few months. This week saw things get as tense as they have been in a while as the Ukrainian military continued to carry out armed operations against armed, pro-Russia militiamen who have taken over many towns across Ukraine’s eastern half. Ukraine’s ousting of pro-Russia rebels has been met with mixed results thus far and is not doing much in the way of discouraging the militiamen.
Earlier this week, however, Russian officials warned that any further armed action taken against Russians living within Ukraine will be considered an attack on Russia itself. This not so subtle warning was enough to discourage much of the Ukrainian military which has since downsized or completely abandoned operations to oust Russian rebels. Even more recently, the Russian military has been building up a strong presence along its border with Ukraine and is staging a number of quite obviously threatening military exercises. As investors head into the weekend it is very likely that a more risk-averse attitude will set in, thus making it easy for safe-haven demand to prop up spot gold and silver. As it stands currently, that is exactly what is happening as gold is back above the $1,300 threshold and silver is just a tad below the $20 mark.
Ukraine is currently stuck between a rock and a hard place because while the interim government wants to oust the pro-Russia rebels, any further action may result in Ukraine engaging a military combatant that vastly outclasses and outnumbers them. While it is unclear how this crisis will figure itself out, it is a certainty that something will have to give soon.