Gold and silver have been under performing over the first half of the week due to stronger economic news and some remarks made by members of the Federal Reserve. At this point it is clearly evident that many investors and their families are on summer vacation and have taken their minds off of the daily bustle that is the world marketplace.
Even though gold and silver have been declining in value for the majority of the beginning of this week, the US Dollar Index is not to blame. In fact, the USD Index is mirroring gold and silver and while the yellow metal is sitting around a 3-week low, the greenback is hovering around a 5-week low. Apart from European economic news, investors and market watchers have few stories to latch on to throughout the duration of the week.
European Economic News
Since the day the year 2013 started, economic news out of Europe has been disappointing to say the least. It seemed as though every time an economic report from the Euro Zone was due out, investors ducked and covered in preparation for the backlash that a weaker European economy would bring.
This week has been a lot different than most others this year due to the fact that we have now seen three consecutive days of positive economic news stories. Monday brought with it the latest Purchasing Manager’s Index (PMI) reading for Europe, and finally the region saw a reading above the 50 threshold. Any reading below 50 suggests economic contraction while a reading above 50 is a solid indication that the economy in question is growing.
Tuesday brought with it a report which indicated that the number of manufactured goods ordered in the Euro Zone from May to June increased by nearly 4%. Finally, Wednesday brought with it news of increased German industrial production from May to June.
Investors have renewed their faith in the European economy, though only time will tell if this renewed faith is justified or not.
Fed Confuses Everyone
Despite the fact that the US Federal Reserve, namely Ben Bernanke two weeks ago and the FOMC only last week, has assured the general public that monetary policy is not on a preset course, Fed members continue to contradict what has recently been stated.
Just a few days ago, Dennis Lockhart, president of the Atlanta Federal Reserve bank, made comments alluding to the fact that monetary policy is, in fact, likely going to be wound down before the end of the 2013 calendar year. This is frustrating not only because Lockhart is making comments that are in direct opposition to those the FOMC made last week, but it is especially frustrating due to the fact that the Fed’s remarks are becoming harder and harder to trust. It seems as though no one at the Federal Reserve has any real idea of what is going on with monetary policy, and for this reason it would be appreciated by the general public if the Fed’s members refrained from making comments that are seemingly unfounded. It is looking more and more like the Fed has no idea that their words and announcements have direct effect on the world marketplace, yet another point of frustration for investors.