For yet another week, precious metals ended up moving backwards just about the whole time. There were a variety of factors contributing to this, but for the most part it was stocks as well as the USD that prevented spot values from appreciating. In fact, this past 5-day trading session accounted for gold’s worst week in more than a half year.
Rather than economic data actively driving metals lower, it was instead the feelings of investors that pushed them down. For one, the political uncertainty that was facing Europe a few weeks ago seems to have cleared up. When we say this, we are not talking about Europe as much as we are talking about what is happening in France. Previously, gold was making gains thanks to the somewhat strong belief that far-right Marine Le Pen would emerge victorious in the upcoming second and final stage of the French elections, however that is not much of a concern anymore.
Even though Le Pen is one of two to have made it to the final round, she is not polling well currently and the belief is that she will lose.
In news from the United States, expectations that another interest rate hike announcement will be made in June is beginning to dominate the discussions of investors. In case you were unaware, or have simply forgotten, the prospect of higher rates is bad for precious metals precisely because it is good for the US Dollar and stocks. Basically, higher interest rates increase the cost of holding gold and silver in lieu of interest-bearing assets. Another way of phrasing this would be to say that low interest rates tend to exist when there is a lot of uncertainty within the economy. With this uncertainty, low rates are usually complemented by an increased demand for precious metals. Being that rates are on the rise, it almost goes without saying that the economy in the US–and around the world—is improving and in a better position. So, rather than protect themselves from uncertainty via precious metals, investors are increasingly turning to other assets in hopes of making more money, and faster.
This is a situation we will continue following, as the speculation regarding rate hikes is something that, clearly, influences the global marketplace quite significantly.
After the first few months of the year brought about some rather disappointing jobs figures, April ended up beating the expectations of the market. According to the Bureau of Labor Statistics, the US economy created more than 210,000 jobs last month. Economists were anticipating that there were going to be in upwards of 195,000 jobs created last month.
As far as the unemployment rate is concerned, it dropped from 4.5% last month to 4.4% this month. Considering economists were not anticipating that the unemployment rate would change at all. Unfortunately, the news was not all good as the previous 2 months’ worth of jobs data was revised downward.
In the wake of the jobs data, precious metals did not do much moving. Finally, there was some wage data dealt today as well. According to the data, average hourly wages improved by about 7 cents during April. Perhaps even more notable than that is the fact that, over the last year, average hourly earnings have increased by 2.5%. For a long time, the fact that wages weren’t improving was constantly undermining the fact that jobs data was improving. Now, we are beginning to see some improvement on the part of wages as well.