Gold and silver both had off weeks this week as the first full week of May brought with mainly news that was of no use for metals. Poor economic data out of China, immediately following a day of surging stock prices confused most investors as a slew of other nations around the world lowered interest rates much like we saw the ECB do not too long ago. The US dollar is gold’s main combatant and a late-week run hurt both gold and silver on a day many were hoping would be positive.
While Chinese stocks experienced incredibly highs early in the week, it was the mid to latter part of the week that had people concerned. The reason was because two main economic reports showed up worse than expected. For one, China’s Producer Price Index (PPI) was seen to have fallen by a larger than expected margin this past April which has led many to believe that the second largest economy in the world is starting to show signs of slow growth and stagnation.
On top of that, inflation in China rose by 2 tenths of a percentage point more than expected in April which is more bad news for the large Asian nation. Despite all of this, physical demand for gold is still at such a peak that stores are running out of anything gold or silver. In Hong Kong alone the thirty tons of gold that were sold at the end of April and beginning of may was over 50% more than at the same point in time last year.
It seems as though this whole week was riddled with back and forth news on the USD index. One day it was up and the next it was down to the point where people really had no idea what was going to happen next. Firday’s USD index delivered a sufficient and lasting blow to precious metals which helped weekly market losses go from being insignificant to a story worth talking about.
So long as the USD is doing well against other currencies around the world, it is unforeseeable that gold will be able to make lasting comeback. It is even more unlikely that gold will bounce back for good because the only thing that other currencies around the world are doing as of late is getting weaker compared to the dollar.
As we move into next week it will be key to watch not only the US dollar, but also all developments out of China. Both the USD and much of Asia have been key indicators as to where gold will move and it does not seem like that will change come next week.
Gold started the week at $1,471 and by closing time on Friday it was at $1,447. This is a loss of $24. Silver started the week at $24.20 and by closing time at the end of the week was at $23.87. This was a loss of about 33 cents.