Monday and Tuesday were not too terrible for precious metals, but there is no doubt that they could have done better. Monday saw both gold and silver hold their positions but Tuesday brought with it about a 16 dollar decline for gold. While this decline is not too substantial by any stretch of the imagination, no decline is a good one. This number was reversed in the overnight and early morning hours on Wednesday as a weaker dollar as well as positive economic news from Asia and Europe was enough to help gold pick up the losses it suffered on Tuesday. Hopefully this will be the impetus gold needs to surpass the $1,500 threshold, but only time will tell.
Weaker Dollar and More Interest Rate Cuts
Any precious metals investor knows that a weaker US dollar typically means good things for the spot values of both gold and silver. Today it was no different as the USD was less attractive to investors which prompted increased interest in gold and silver. So long as the dollar stays weak gold could have an exciting back end of the week, but the dollar’s strength or weakness will likely be decided by the wide range of economic reports that will be released this week starting today.
Only a few days ago it was the Australian Central Bank who was cutting interest rates in their country, now we go to the other side of the globe to see that Poland is yet another country employing this tactic. Both their base interest rate as well as deposit interest rates were cut by .25%. This means that the base interest rate in Poland is now at 3% and deposit interest rates are settled in at around 1.5%. This news comes just days after the European Central Bank announced its plans to cut interest rates in the region as well.
Positive Economic Reports
Two very different parts of the world saw economic output reports that were far better than expectations. First off, China posted a trade surplus in April that was almost $3 billion better than expected. Economists had projected that China would post a trade surplus a bit higher than $15 billion when in actuality this number was more like $18 billion. This news not only boosted the Chinese stock markets but most Asian stock markets as well.
We fixate our attention back on Europe for this next report as German industrial output was far better than expected. Though it was projected that April’s industrial output numbers would decline by a few tenths of a percentage point, the reality is that output rose by over a whole percentage point. This is warmly welcomed news from the Eu’s leading economy which has been struggling as of late.
Rounding Out the Week
As we look forward to the final parts of this first full week of May it will be interesting to see if the US dollar will remain as downtrodden as it was at the time markets opened on Wednesday. If this is the case it could present the perfect atmosphere for gold to move forward and above the $1,500 mark.
Another thing that will be intriguing to look out for is to see if the upcoming slew of economic reports out of the US will have any major implications for precious metals. Though most of the reports that are set to be released are not too major, anything can happen to metals when it is the US economy we are talking about.