Gold and silver spot values are trading sharply higher in early US trading on Thursday thanks to a variety of factors. Generally speaking, risk-aversion is beginning to take a stranglehold on the marketplace as European and US equities lose intense amounts of value. Yesterday brought with it the release of the latest FOMC minutes from their June policy meeting, but they ended up having little to no impact on the precious metals market.
Platinum output from South Africa has reportedly fallen 49% year on year as a result of mine strikes that have plagued much of the last 5-6 months. While the strikes are now mostly resolved, the mines cannot possibly make up for all the lost time and lost production. This fact, along with upbeat reports regarding auto sales in the United States, is causing platinum to trend significantly higher this week.
New Developments In China, Europe Fuel Risk-Aversion
Despite yesterday’s release of the FOMC’s latest minutes, today’s focus has almost solely been on overnight developments in Europe and Asia. World equity markets are selling off as a result of weaker economic data in Europe and China. Among the weak data from Europe was a report claiming that EU housing prices fell by .3% in 2014′s first quarter. In addition to that, Italy’s industrial output was recorded as declining by more than 1% just this past May.
In China, it was reported that year on year exports in June only rose by about 7%; 3% less than what most market experts were anticipating.
All of this data has helped the precious metals market, US Dollar, and US treasuries surge forward today. Now, as a result of the weak data from Europe, investors will be forced to pay close attention to bond yields from the EU in order to gauge investor confidence in the region.
Violence In The Middle East Continues
Over the last few weeks, we have been reporting on violence happening throughout the Middle East, most notably in Iraq. This week, however, the situation in Iraq is playing second fiddle to new offensives headed by Israel on the Gaza Strip. In response to recent rocket fire from Palestinian forces, the Israeli army has been seen destroying what it is calling “strategic” points throughout Gaza.
With tensions soaring in and around the Middle East, safe-haven demand for precious metals is once again becoming a factor helping boost spot values.
As we head into the final day of the week, I expect the market to continue paying close attention to all proceedings taking place in Israel. The situation is very tense and can devolve into more of a widespread conflict, or at least that is what so many people believe.