Precious metals had an interesting 5-day trading week, and will finish the week having posted marginal gains. All in all, there really wasn’t much on the slate for investors to consider and the week was more lackluster than anything else. Apart from continued speculation regarding the timing and extent of interest rate hikes, the market does not have all that much to take away from this week.
China Devalues Yuan, US Reacts
In a somewhat surprising move earlier this week, China’s central bank moved to devalue the Yuan not once but two times. First, on Tuesday, we received wind of the People’s Bank of China moving to devalue the Yuan by nearly 2%, bringing it to its lowest level since 2012. Initially, US stock markets suffered, as did the greenback. Thanks to this, the precious metals market was able to gain some traction and managed to push forward after what seemed like weeks without having made any gains.
Then, even more surprising was the People’s Bank’s move on Wednesday to further devalue the Yuan. This time, the bank moved to devalue the currency by little more than 1%, but it still had a negative impact on both US stocks and the Dollar. Thanks to this, gold and silver posted consecutive gains for the first time in weeks.
According to China, the move to devalue the Yuan was made in an effort to boost exports by making them more affordable for foreign purchasers. You see, the Chinese economy has slowed down a good bit in recent history, and without action on the part of its central bank many feared that the slowdown would inevitably be turned into something more severe. Though stocks and the US Dollar have since bounced back to some extent, gold and silver were able to regain some of the value that had been lost over the past month or more.
Upbeat US Economic Data Streams In
Another key topic for investors to focus on this week was an influx of some US economic data from the month of July. For one, it was reported that retail sales came back upbeat. The month of July saw retail sales tick noticeably upward as 11 of 13 categories reported on by the Commerce Department showed growth. Not only that, but June’s retail sales were revised upward from a previously recorded reading of -.6%. As you might expect, this data only serves to reinforce the belief that interest rates in the US will be raised in September, even despite recent comments from the vice chairman of the Federal Reserve.
Another upbeat piece of data was the weekly jobless claims report. Though last week saw more than 5,000 additional applications for unemployment benefits, the monthly average for jobless claims was reported as being at a 15-year low. All in all, this employment data was perceived as being majorly upbeat and ended up helping stocks and the US Dollar rebound from losses tied to China’s devaluing of the Yuan.
Looking ahead to next week, you can expect that the focus for investors will remain the same. We will continue analyzing every bit of economic data in order to see how the outlook on interest rate hikes will change. For now, the general consensus is that rates will be risen before the Fall, but that is always subject to change. There is not all that much data to talk about next week, but the progress of stocks and the US Dollar will be gauged. Should these two asset classes improve next week, you can expect gold and silver’s spot value to tick back downward.