Through the first two days of the week gold and silver have suffered a bit with Monday being more or less stagnant and Tuesday being a day where gold posted losses that approached 20 dollars. A cut in Australian interest rates coupled with a surging Japanese economy are the two culprits in the small decline we have seen so far. The overnight and early morning hours on Wednesday, however, has seen gold regain the losses it posted on Tuesday.
Weaker US Dollar
Investors were disappointed to see gold decline on Tuesday, even if it was only about 16 dollars, because they feared it would start a trend of losses for the rest of the week. Before most of those same investors even rolled out of bed on Wednesday gold’s fortunes did a complete 180 as all 16 dollars and then some were gained back by 9am. More often than not gold has a negative correlation with the US dollar and it comes as no surprise that a weaker dollar means for a stronger outlook on gold.
There are a few economic reports set to be released both today and in the coming days which have the potential to influence the precious metals market. It will also be important to watch for news out of Europe as early reports from the EU are indicating that Poland is yet another country to have slashed interest rates. According to Market Watch, Poland has slashed their base interest rate from 3.25% to 3% and their deposit interest rates have fallen to 1.5%.
Positive German and Chinese Economic Reports
The latest economic report out of China has shown that April’s trade surplus was just shy of $3 billion better than mot people had anticipated. The projected dollar amount of China’s April trade surplus was over $15 billion with the actual amount ringing in somewhere around $18 billion. This news was positive for most Asian stock markets as well as precious metals.
Our next bit of news, surprisingly enough, comes from Germany whose economy has been struggling as of late. While the original projections for industrial output in April was that numbers would be down .2%, actual final numbers show that industrial output was actually up by over a whole percentage point; this was most definitely some unexpected news. This report also gave some power to precious metals which was also part of the reason why gold was able to recover Tuesday’s losses before trading even started in the US.
Looking Ahead
As we move into the last half of the week we will need to keep our eyes on a few different situations but most heavily watched will be the slew of economic reports coming out of the US. Additionally, investors will be hoping that the weaker dollar we saw at the beginning of today will remain weak so that gold and silver have some room to stretch their legs and grow a bit.
It seems as though gold is have a hard time surpassing the $1,500 mark and a weaker dollar could be just the thing the yellow metal needs to break the threshold.