Both gold and silver made solid gains in the overnight and early morning hours on Wednesday, despite it being thought that the morning would remain flat for metals. Reuters.com reported that the stronger numbers seen as markets opened in the US for both gold and silver can be attributed to strong demand from China who is the world’s second largest buyer of gold behind India. As Wednesday moves on investors more readily shift their attention to the US Federal Reserve as its chairman is scheduled to address Congress about the current state of the economy as well as the future of monetary policy in the US. This single story has the chance to have major impact on the spot values of both gold and silver moving forward.
Bernanke Speaks to Congress
Though we still have to wait until Ben Bernanke, Fed Chairman, addresses Congress about the economy and monetary policy, there are plenty of people who think they know exactly what his address is going to consist of. The popular, ongoing thought is that Bernanke is going to announce that the Fed’s monthly bond-buying initiative is going to be wound down and eventually stopped in the near future. The reason for this is that many believe the US economy has improved enough from the economic collapse in 2008 that the pumping of money into the economy by the government is no longer necessary. Whether this is true or not is a matter of debate in many circles, though one cannot really argue against the results we have seen from both the US stock markets and the USD as of late.
Should it be announced that QE will be wound down, you can expect this news to be incredibly bearish for both gold and silver. With that being said, there are still plenty of people out there who think that Bernanke will announce that he is still confident in Quantitative Easing and will not make any major changes to the bond-buying program. This type of address to Congress would be bullish for metals, or so many people believe.
FOMC Notes and China
Another piece of news set to be released on Wednesday are the notes from the latest Federal Open Market Committee meeting. This is yet another place where investors could catch some news about the future of monetary policy in the United States.
Looking forward to tomorrow, precious metals market watchers will be paying close attention to China’s latest manufacturing data. Though this news story may not have immediate affect on the movement of gold and silver spot values, it will help us better understand China’s economy and just how well (or badly) it is doing.
Since China is one of the world’s largest consumers of both gold and silver, any economic news from the country should not be taken lightly by investors.
Rounding Out the Week
As we move into the last few days of the week, there are not too many things to look out for besides the stories that have been mentioned above. As always, investors will keep their eyes fixated on the movement of both the US stock markets and Dollar as those two entities have been dictating the movement of precious metals more so than anything else lately.