August 1st Weekly Silver Market Update

Gold and silver posted modest gains in the overnight and early morning hours of Thursday after the marketplace digested the prepared text from the FOMC’s upcoming meeting which was released yesterday. This is especially good news because the positive economic data that was released yesterday put a decent amount of downward pressure on gold and silver spot values. Closing of markets on Wednesday brought with it the end of July which was, all in all, a pretty good month for precious metals. While gold and silver did not break the bank with how much value they gained, July was one of the first times in a while we saw both metals net a gain from beginning to end in a month.

As we bring this week to a close the two main things investors will be looking out for is the FOMC’s meeting to take place and the latest US jobs report, both of which are scheduled for tomorrow.

Upcoming US Jobs Report

Yesterday saw an economic report be released that was much better than expected. The second-quarter GDP report for the US came in about 8 tenths of a percentage point better than expected. When most market experts were anticipating second-quarter GDP to increase by only .9%, the actual figures were stunning in that they came back positive to the tune of about 1.7%. This news initially hurt gold and silver as does most news indicative of a better economy, but thanks to the FOMC’s meeting and its prepared text being released yesterday, the losses precious metals took on were not major.

Tomorrow is expected to be another day of positive US economic data in the form of the latest US jobs report. As of now the expectation is that non-farm payrolls will increase by about 175,000 which is, in turn, expected to force the unemployment rate to fall from 7.6% to 7.5%. If this is the case, the news could be adversarial to gold and silver, at least in the immediate wake of the report being released.

FOMC’s Prepared Text

Even though we have to wait until tomorrow for the FOMC to actually hold their meeting, the main summary of what is going to be discussed and subsequently announced has already been released. In the late hours of Wednesday it was announced that the main speaking topics of tomorrow’s meeting will more or less echo what Ben Bernanke had to say only about two weeks ago. Investors and market watchers are going to come into tomorrow expecting to hear that monetary policies will remain accommodative and that Quantitative Easing is not going to be done away with just yet.

In case you are unaware, Quantitative Easing is the government’s $80+ billion monthly bond-buying initiative. The reason the government is buying so many bonds is due to the fact that their pumping the economy with money works to bring down the overall value of the US Dollar. A less-expensive US Dollar means, in theory, that other countries will be more attracted to our exports. If other countries are buying up our exports at increasing rates there is no other imminent consequence other than economic growth. So far it seems as though QE has worked more or less in the fashion that it was expected to, but the Fed made it clear that simply because the economy has been improving does not mean it is guaranteed to continue to improve.

An announcement as dovish as this has done well to improve the demand for physical gold and silver, even if only by a little bit.




Posted in News

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