Gold and silver spot values are mixed as of the writing of this post early Wednesday, and this week has thus far been interesting to say the least. On Monday, spot values shot upward and remained in those elevated positions for the entire day; something that helped gold and silver regain some of last week’s losses. Yesterday, however, some of Monday’s gains were parred due to a stronger Dollar, stronger US equities, and weaker crude oil. While there has been some economic data on the table this week, the attention of the market has been fixated upon two factors: the European Central Bank meeting as well as the price action of crude oil.
The ECB meeting is grabbing the attention of the market like it always does, but this time is a bit different due to the prevailing belief that the ECB is on the verge of announcing an addition to current monetary policies. Because there is no way to tell whether or not the ECB will enact a policy shift, the entirety of the global marketplace will be hanging on every word spoken by president Mario Draghi during the post-meeting press conference.
QE On the Horizon for the EU?
If you’re at all familiar with the monetary policies of the US Federal Reserve, the words quantitative easing are not foreign to you at all. The reason for this is due to the fact that, up until about 2 months ago, quantitative easing, or the purchase of government bonds in an attempt to stimulate a struggling economy, was a mainstay in the United States. In fact, many credit QE as being a major factor in bringing the US economy out of a recession.
For the European Union, it has been very clear for quite some time that something needs to be done in order to fuel economic progress. Just about a week ago, the Organization for Economic Cooperation and Development made comments saying that the EU’s lack of economic growth is threatening to undermine global economic growth. While this is bad for the outlook on the EU economy, it did the US economy 0 favors as slowed global economic growth will more than likely mean further delayed interest rate hikes in the US. This, however, could prove to be positive for precious metals, at least in the short run.
Adding credence to the belief that QE will be announced in the wake of the ECB meeting is the fact that ECB president Mario Draghi made comments saying that QE measures are not out of the question quite yet. While QE measures very well might not be announced, the market will undoubtedly be paying very close attention to anything and everything said by the ECB in their post-meeting press conference.