January 15th Midweek Gold Market Update

Gold and silver are trading slightly down in the first half of Wednesday thanks to some stronger retail sales reports out of the US. Last Friday’s weaker than anticipated employment report for December pushed gold forward while simultaneously causing many investors to worry about the strength of the US economy. This week has thus far been generally quiet which explains why price movements by both stocks and precious metals have not been too dramatic.

If investors are further reassured that the US economy is performing well in the coming days it will not bode favorably for precious metals.

Retail Sales Reports Lift USD

Upbeat retail sales reports in the United States lifted the Dollar as well as most stocks early in the day on Wednesday. These reports also mitigated the negative impact last Friday’s weak employment report had on the market. In case you missed it, non-farm payrolls for this past December were reported as growing by only 74,000. Compared to market expectations of a 200,000 payrolls increase in December it is easy to see why investors were so shocked when the data was made public. The disappointing employment report was even more perplexing for investors who have been hearing nothing but positive reports from the US economy as of late.

Before US stocks began making gains today, European stocks were well on their way to a positive Wednesday. In fact, most stock markets around the world had a pretty solid day today, a perfect complement to the World Bank predicting worldwide economic growth in 2014 would be higher than originally expected. Should global stock indexes continue to have days like today it will be hard for gold and silver to gain any sort of momentum. In all, precious metals have lost a lot of their luster as safe-haven assets recently thanks to increased economic strength in both the US and Europe.

Perhaps even more adversarial to precious metals today was a report claiming that two voting members of the FOMC made it clear that they want bond-buying (Quantitative Easing) to be completely done away with by the end of the year. Last month the Federal Reserve decided to taper its $85 billion monthly bond-buying program by $10 billion. The decision to taper QE worked against precious metals, which only leads investors to believe that further tapering measures would have a similar effect.

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