January 28th Midweek Gold Market Update

Precious metals are backing off from yesterday’s gains, but are not conceding too much value to be honest. So far, this week has played host to some corporate earnings reports from major US companies as well as the beginning of the most recent Federal Open Market Committee meeting.

In case you missed it, last week saw the European Central Bank finally announce that they are finally going to be introducing quantitative easing in the near future. Officially, the ECB announced that they would be instituting a bond-buying plan that will see more than 60 billion euros purchased by the central bank each month. Though the QE announcement did not come as much of a surprise to anyone, the fact that there will be 60 billion euros worth of bonds purchased each month was a bit surprising. In the wake of the ECB meeting, the US Dollar rallied thanks to a further weakening Euro.

Poor Corporate Earnings Hurt US Stocks

The big news story of the week so far came yesterday in the form of poor corporate earnings reports from the United States. Companies like Caterpillar, Microsoft, and Proctor & Gamble all reported weaker than expected earnings. For Caterpillar, a decrease in mining activity across the world resulted in fewer orders for construction equipment both in the US and elsewhere around the world. For P&G, the surging Dollar resulted in overseas earnings being devalued a bit.

With corporate earnings coming back weaker than expected, US stocks ended up having an extremely poor day on Tuesday. In fact, the Dow posted its biggest single day loss since October. Because of this downward price action on the part of US equities, gold and silver were able to add a bit of value on Tuesday.

Now, the market will turn its attention to the ongoing Federal Open Market Committee. With their meeting now concluded, investors are looking ahead to the post-meeting statement to be delivered by Fed Chairperson Janet Yellen. Despite investor concern regarding the future of interest rates, it is now generally agreed upon that we will not see rate changes take place until sometime in 2016, at the earliest. All in all, however, investors have little else to pay attention to apart from continued corporate earnings reports, so I imagine all eyes will be on the Fed.

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