This week has been pretty dismal for precious metals thus far, as both gold and silver have lost far more than the value they gained a week ago. A number of factors have been working against metals, but none more so than the surging US Dollar. The Federal Reserve played a major role in this week’s proceedings, highlighted by a surprising statement made by Janet Yellen today.
The crisis in Ukraine is now actively being ignored by the market because there have simply not been any real developments since last week. While the referendum that took place on Sunday effectively gave Crimea back to Russia, the EU and the United States have not taken any real action against Crimea like many previously thought they would.
Tapering Intensified, Yellen Makes Surprising Comments
Apart from the crisis in Ukraine, the market was preoccupying itself with this week’s Federal Open Market Committee. The meeting kicked off on Tuesday and wrapped up late Wednesday afternoon and, as expected, the outcome of the meeting was another $10 billion reduction to Quantitative Easing. This news worked against precious metals and ended up aiding the US Dollar.
In the wake of the meeting, Janet Yellen made her first post-meeting address to the press since being appointed head of the Federal Reserve. No one was expecting her to deliver any shocking news, though that expectation, or lack thereof, was quickly overturned. Yellen, in her statements, said that interest rates may be raised as early as next spring. She also said that interest rates would remain low even after the unemployment rate drops below its key point of 6.5%.
Add some upbeat US economic data on top of all this and you have a perfect recipe for a stronger US Dollar, and that is exactly what has been happening over the course of the last few days. Spot Gold, now hovering around a 3-week low, is looking for any amount of bullish news to pick it up from its most recent tumble.
As we head into the last day of this week and next week, investors will continue to keep a close eye on the situation in Ukraine as well as any and all economic data coming from China. Financial and economic worries are currently plaguing the world’s second largest economy, essentially driving down the recently improved outlook on the Chinese economy for the duration of 2014.