Despite a lack of any major US economic news this week, the first half of this 5-day session has been exciting nonetheless. Tensions in Crimea are back to what they were a little more than a week ago as the pro-Russian military presence in the region has been given a significant boost in recent days. With a referendum that will basically decide the fate of Crimea scheduled to take place on Sunday, the world is anxiously awaiting how Russia, Ukraine, and the West will handle the next few days’ events.
The US Dollar has been trading down the last few days as a direct result of worsening Chinese economic data and was dealt another blow today. Poor Chinese economic data is making headlines this week, but beginning on Friday and carrying over into the early parts of next week will be speculation with regard to the outcome of next week’s FOMC policy meeting.
More Downbeat Economic Data From China
While a weak run of Chinese economic data typically tends to work against spot gold and silver, this time is a bit different. Not only is China the epicenter of slowing economic growth, it is beginning to take one some credit/financial problems for the first time basically ever. A major Chinese company went into default recently, and because this is the first time that has ever happened in China, many investors are worrying about the overall financial stability of the nation, worries that have prompted more safe-haven buying.
As if the credit and financial problems weren’t enough for China, they also released a poor report with regard to industrial output, one of their most consistently positive statistics. For the January/February period, China realized year on year industrial output growth of just over 8.5%. While most other countries would kill for numbers like these, the 8.6% reported growth was far short of expectations which forecast over 9% growth. This report also saw Chinese industrial output improve by a whole percentage point less than it did in December.
In the wake of this news the USD is falling at a rapid pace and is hitting new lows ever since Wednesday morning. Increased safe-haven demand in conjunction with a weakening US Dollar may be the perfect recipe for spot gold and silver to go on rallies over the coming days and weeks.
Investors will also continue to watch the situation in Crimea closely as any amount of violence will only work to aid safe-haven demand more than increased tensions already have.