Gold and silver have performed dismally this week as both metals are going to end up closing the week having taken heavy losses. There are no extraordinary circumstances prompting precious metals’ decline, but rather a perfect storm of events that make investing in gold and silver seem not as appealing as other options. With other currencies losing value and the US dollar gaining it, it comes as no surprise that the spot price of both gold and silver has been falling.
Weakening Currencies, Strengthening Stock Markets
The title of this section says it all, as currencies around the world become weaker relative to the Dollar, gold and silver suffer. Adding insult to injury, weak currencies have caused stock markets in certain parts of the world to surge which has taken investor interest away from safe-haven assets like gold and silver and has prompted riskier investments into a plethora of different stocks and marketplaces.
If these two situations were isolated, and not happening simultaneously, gold and silver would suffer, but likely to a much lesser degree. The fear that was lingering all week was that gold would fall below the $1,400 mark, and that is exactly what happened. It is a shame to say, but gold is on the fast track to fall below the $1,300 mark too. The Japanese Nikkei index is continuing to post its best numbers in years while the Yen and the Australian Dollar (among many other currencies) are hitting low points against the dollar that have not been seen in a year or more.
QE to be Wound Down?
At this time last week we were hearing rumors that the easy monetary policy being implemented by the US Federal Reserve may be brought to an end soon. The purpose of QE was to bring the US economy out of the doldrums by weakening the dollar and thus increasing exports. It seems as though the US economy has made a decent recovery from its collapse in 2008 and experts everywhere feel as though QE measures are no longer necessary.
Up to this point no timetable for how or when QE will be brought to an end has been released, but it seems as though it will be sometime in the near future. These rumors alone were enough to bring gold and silver down at the end of last week so one can only imagine what is going to happen to precious metals once the announcement is actually made; if it is going to be.
As we move into next week the two main topics discussed in this post will be what investors have their eyes on. The US Dollar continues to rise as stock markets do too, and until one or both of these things is slowed down or reversed, gold and silver will have a hard time gaining any of the ground they both lost this week.
Eyes will also be focused on the Federal Reserve as people everywhere anxiously await an announcement in regards to their monetary easing program. An announcement saying that it will be brought to an end sometime soon will likely be bearish for metals and that is the last thing investors want to see at this point.
Gold started the week at $1,448 and when all was said and done it lost about 88 dollars to end at $1,360. Silver started the week at $23.87 and finished the week on Friday at $22.26. This was a loss of $1.61 .
This market update is provided weekly with analysis. You can always check current silver prices by watching our on-site charts.