May 14th Midweek Gold Market Update

Gold and silver are both trading sharply higher in the early morning hours of Wednesday thanks to some short-covering by investors. There is a healthy amount of EU economic data already on the table and investors have just received word of the US PPI for April. For the first time in about a week or so spot gold is up above $1,300 while silver is only a few cents from once more breaking trough the $20/ounce threshold.

The crisis in Ukraine is still very much on the front burner but is being overshadowed by other factors as there haven’t been too many noteworthy events since the referendum vote that took place last Sunday. The vote, which many people believe to be completely and utterly rigged, showed that 90% of the Donetsk region of Ukraine would prefer to be independent. When I say “independent” I am essentially saying they would rather not be ruled by Kiev and instead be ruled by Moscow. It will be interesting to see what happens should Ukraine attempt to annex Donetsk like they did Crimea.

Economic Reports Abound On Wednesday

Before US markets opened today, the EU had already received its fair share of economic reports, most of which only further intensified concerns with regard to deflation across Europe. The first report was April’s EU industrial production numbers for the month of March. Contrary to the expectations of many, industrial production fell by about .3% in March and was down by one tenth of one percent year on year.

In Germany, it was reported that producer prices fell by .2% in April, but were up by more than 1% year on year. In France, producer prices remained planted in April but managed to be up by more than .5% on an annualized basis. All of this economic data only works to intensify the public’s outcry for some sort of monetary stimulus to be implemented in order to stave off deflation. As it stands, most are anticipating that the European Central Bank will announce some sort of new monetary stimulus measure at their June policy meeting.

In other news from around the world, the central bank of China has called for smaller banks to increase their loan-lending to those who are looking to purchase their first home. The housing market in China has not been doing well as of late and this is another attempt by the central bank to push the market forward.

Finally, the US’ producer price index was up by more than half a percentage point in April and has, in turn, caused the US Dollar to take a bit of a dive. The greenback losing some value in the early day’s proceedings has so far helped precious metals make the gains we are witnessing currently. It will be interesting to see if spot values can retain their elevated positions or if they will repeat yesterday’s price action and fall back down to earth before the end of the day.

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