Gold and silver are trading lower for a third consecutive day this week, adding to losses compiled last week. It seems as though precious metals’ rally is now done and dusted, though we are only one development in Ukraine away from seeing safe-haven demand shoot right back up to levels it was at a little more than a week ago.
Barclays revised their forecast for spot gold today, though their revision still sees the spot value of gold drop below current levels by the end of the year. The fact that Barclays predicted spot gold to decline from where it is at currently does not do anything to aid the current outlook on precious metals.
Quiet Week Thus Far Working Against Gold and Silver
Gold and silver have continued along last week’s downward trend thus far this week. We have seen few major market developments and the economic data that was released had little impact on the marketplace. The lack of any fresh bullish data combined with the fact that the overall outlook on metals is becoming bleaker by the day is hurting spot gold and silver significantly.
Yesterday, James Bullard announced that he is continuing to see improvement in the US economy and that he also expects the overall unemployment rate fall below 6% sometime before the end of 2014. This only adds credence to the belief that QE will be done away with by the end of the year and that interest rates in the US may be risen as soon as this time next year.
Thanks to the lack of news this week, investors are focusing more readily on the monetary policies being employed by central banks around the world. Recently worrisome financial and economic data from China have a large majority of investors preparing themselves to see some change in Chinese monetary policy, though it is not clear what type of change is expected. Currently, most agree that the Chinese central bank needs to loosen its current monetary policy in an attempt to stimulate the economy. Ever since the beginning of the year the Chinese have given us disappointing report after disappointing report with regard to their economy. At first, the succession of dismal reports was attributed to nothing more than a temporary lull in the Chinese manufacturing sector, but now, more than 3 months later, the only news we are seeing out of China remains as poor as it was in January.
The strength or weakness of the Chinese economy is of particular importance to gold and silver investors for the sole fact that the Chinese are the largest consumers of gold and silver on an annual basis. Because of this, their buying or lack thereof of precious metals heavily influences the spot value of said metals.