Gold and silver have seemed to, at least momentarily, halt their decline which has been going on since roughly this time last week. Having lost well over $150 in barely over a week, gold investors are looking for anything they can to give them confidence that the precious metals market is stabilizing. Weaker than expected GDP data out of the US on Wednesday is likely the reason metals have posted small gains this morning, though a weaker USD Index also probably helped the situation as well. Volatility in the precious metals market is a rare occurrence, though if you were to look at the past two weeks of activity you would likely think I was lying.
US Economic Data
The first quarter GDP of the United States was due out yesterday, and when its numbers were finalized the picture it painted was not as bright as many investors would have hoped, or expected it to be. Expectations were that GDP growth in the first quarter would be up by over 2.3%. but the actual numbers showed that the United States’ GDP grew by a few tenths of a percentage point under 2%. While these numbers are still much better than negative growth, the fact that they have come in weaker than expected have made many worry as to whether the Fed’s possible winding down of monetary policy (monthly bond-buying) is the right course of action.
Most US economic data as of late has been positive and indicative of a recovering (recovered) economy, but people still hold true to the thought that we are far from recovered. We will find out more about the monthly bond-buying, also known as Quantitative Easing, that the Federal Reserve is deliberating over in the coming months, but as of now anything you hear is merely a product of speculation.
Other central banks have explicitly stated that they will retain their accommodating monetary policies as long as they see fit. This is the exact opposite of what the US is likely going to do, though most of the economies that are keeping their monetary policies in tact are ones that are experiencing deep economic and financial troubles, especially European and Asian economies.
Asian Demand Down
Historically, the summer months have been ones where Asian countries and their citizens buy up large quantities of gold and silver. This year is different, however, as places like China and India are showing very low demands for physical gold and silver.
India’s lack of physical demand can be directly attributed to the fact that the Indian government recently placed a tariff on imported gold and silver. This means that even though gold and silvers’ spot values are falling, the metals are still expensive in India if they are buying gold and silver online from other countries.
Closing Out the Week
As we bring the week to an end it is looking like gold and silver, for the second straight week, will be victims of heavy losses. Over the course of the past 7 days gold has lost well over $150 in value while silver has declined proportionally similarly.