Gold and silver are both down from early week gains as technical selling is once again running rampant. Now, after a brief break from their prolonged declines, gold and silver are once again feeling the grip of market bears. Yesterday’s bipartisan budget agreement along with next week’s FOMC meeting are two events that are looking like they will hurt precious metals spot values more than they will help them.
Bipartisan Budget Deal Hurts Precious Metals
In case you missed it, US lawmakers came to a somewhat surprising agreement yesterday with regard to a permanent US government budget. The budget deal, the same one that caused a government shutdown back in October, is a positive for the overall US economy as there is one less geopolitical uncertainty for investors to concern themselves with. Less uncertainty in the market tends to foster a riskier investor attitude, something we are already beginning to see. This agreement is also positive because it means that the US government will not be forced into another shutdown like the one we saw only a few months ago.
The budget agreement may also give the FOMC more reason to announce a reduction of Quantitative Easing at next week’s policy meeting. Currently, there is a strong contingent of investors who are expecting to hear a tapering announcement be made at next Tuesday’s FOMC policy meeting. Despite the chance of a tapering announcement being made next week, however, it seems as thought the precious metals market has already adjusted to reduced Quantitative Easing. The reason for this is because the marketplace is expecting to hear of a QE reduction in the near future. This expectation means that when a tapering announcement is finally made the marketplace will not perceive it as a surprise decision and thus it will not have the type of adverse affect on the precious metals market as originally thought. Even if QE reduction is not announced until sometime in 2014′s first quarter, the market will not be shocked in the least.
With investors exhibiting more of a risk-on attitude nowadays, gold and silver are in need of an economic or geopolitical development that will inject some life into the currently lackluster spot values we are witnessing.