Gold and silver spot values have regained a bit of ground through the early parts of Wednesday, fueled mostly by a weaker US employment report for May. Despite their small gains made early this morning, the last week or more has been almost completely adversarial to precious metals. The reason for this is due to speculation surrounding tomorrow’s meeting of the European Central Bank.
Also not helping the prospects of precious metals has been the lack of news with regard to the crisis in Ukraine. Now that matters in the large European nation have calmed down a bit, safe-haven demand for precious metals is more or less non-existent. As we all know, this could change in the blink of an eye, but for now the Ukrainian crisis is sitting comfortably on the back-burner of the marketplace’s attention.
US Jobs Data Gives Metals A Boost, ECB Meeting Looming
As is usually the case with the first full trading week of any month, this 5-day session was expected to emit a large quantity of economic data, and it has so far. Today, investors were greeted with the ADP employment report for the US for May. Compared to expected job additions of more than 210,000, the actual figures showed that only about 179,000 new jobs were added to the US economy last month. This number isn’t terrible, but because it fell short of the market’s expectations it was always going to be beneficial for precious metals.
The Fed’s beige book is due out later today, though all signs are pointing towards it being more of a non-factor for precious metals than anything else.
The biggest economic event happening this week, however, will come tomorrow in the form of the latest European Central Bank policy meeting, where investors are anticipating that a major announcement will be made. Despite it seeming like investors are almost always anticipating some major news to come as a result of these meetings, this time around it seems as though the expectations of the investing world might be met. Due to rising deflationary pressures, of which have been hanging around Europe for more than a year now, many market analysts and investors alike are convinced that the ECB will announce its plans to implement new monetary stimulus sometime in the near future. Though this is not set in stone quite yet, an overwhelming majority of the market feels as though this is exactly what will come as a result of tomorrow’s meeting.
If the ECB does, in fact, decide to implement new monetary stimulus, it is generally agreed that such a move will not be beneficial for precious metals spot values. The reason for this is due to the fact that monetary stimulus in Europe will drive the value of the euro currency downward, thus giving the US Dollar room to make significant strides forward. If the Dollar continues to build up even more momentum than it has already, there is a very high likelihood that such an event will not bode well for gold and silver.
Still, there are those who believe that new monetary stimulus in Europe will, as has been the case in the past, provide raw commodities with a boost. This is not very likely, but it is without a doubt a possible outcome anytime stimulus is mentioned with regard to a major world economy.