Gold and silver began Wednesday down significantly on more liquidation following last week’s Federal Open Market Committee meeting. Stronger than expected economic data out of the United States gave investors and market watchers more belief that the US economy is recovering at rapid rates. As of now the monthly bond-buying currently employed by the US Federal Reserve is very much up in the air and with each better than expected bit of economic data out of the US the spot value of gold and silver falls. Weak physical demand despite low prices is yet another thing keeping gold subdued as well.
Asia In the News
More often than not, when the spot price of gold and silver falls, the physical demand for the metals grows because investors feel as though they are getting a better deal. There would be no time for these coined “bargain hunters” to be hitting the market than now, but such has not been the case. Even with gold and silver in the midst of what can be viewed as a free fall, the high demand for gold and silver out of Asia that we are used to at this time of year simply is not there.
A credit crunch in China, which monetary officials say is only temporary, is causing the average household to have less expendable income. So long as people aren’t able to spend as much, gold and silver will be put on the back-burner and will in no way be a purchasing priority.
India, which is known for a large physical demand for metals, has seen their demand for precious metals drop due to taxes imposed, by the government, on gold imports. These taxes were instituted to help correct a worsening trade deficit and have worked to more or less completely turn Indians off on the idea of buying gold or silver.
Wednesday saw Asian stocks post mixed results in response to the credit crunch only being temporary. Keep in mind that monetary officials stated the cash crunch is only temporary, that does not necessarily mean that such is the case.
European Central Bank Announcement
President of the European Central Bank, Mario Draghi, announced that his bank and its officials will retain their current, accommodating monetary policy for the foreseeable future. This news lifted tiny amounts of pressure off of precious metals, but in the end did not move the market much.
Draghi’s statement more or less mirrored other world central bank presidents statements as it seems the United States is the only country thinking about employing tighter monetary policies in the future.
Rounding Out the Week
As we jump into the second half of the work week, investors and market watchers are going to be watching the spot price of gold and silver to see just how low it can/will go. Many feel as though both gold and silver have bottomed out at this point, though no one can say for certain.
With few major economic stories to latch onto this week, it is looking like the last few days will be considerably rough for precious metals.