Despite today being Wednesday, we are only in the midst of the second trading day of this week due to the celebration of the Memorial Day holiday, which happened on Monday. While this may only be the second day of the week, gold and silver have suffered unparalleled losses and are continuing to decline.
Not helping precious metals at all was a slate of US economic news yesterday, most of which came back much better than market expectations. Despite this, there is a growing sense among investors that the US economy is not growing at the rate many had expected before the onset of this year. Because of this, these same investors are convinced that the Fed must rethink how it is going about tapering Quantitative Easing.
Risk-Appetite On The Rise In Europe, The US
Over the course of the past week or so, the market has become increasing risk-hungry, something that has seen investing funds flow out of solid, safe-haven assets such as gold and silver and into world stock indexes. World stock indexes have been trading up lately and have been seen hitting multi-month and year highs. As is almost always the case, surging equity markets almost always put a damper on the progress of precious metals.
Another bearish factor for precious metals this week has been the continually deescalating tensions in Ukraine. Just this past weekend, elections were held in order to determine Ukraine’s next, official president. Though these reports have not yet been confirmed, early reports are saying that Ukrainian billionaire Petro Poroshenko is set to take over the country’s reigns. Add this to the fact that Russia has recently made moves to bring about a peaceful resolution to the crisis in Ukraine and you have a crisis that is fading from the headlines and becoming more of a regional issue. What was once a crisis that fueled safe-haven demand for precious metals has now become a non-factor for most precious metals investors.
As we head into the last few days of the week it will be interesting to see what direction precious metals head in. The losses incurred over the last few days may be lending credibility to the belief that spot values are on the verge of pegging lower. As it stands, spot gold is in the neighborhood of $1,250/ounce while silver is edging lower, closer to $19/ounce. This week is not expected to be a big one from an economic data standpoint, meaning that the market bears will more than likely remain in control for the foreseeable future.