Gold and silver have been receiving a boost the last few days thanks to a number of different factors. For one, tensions in the hotly disputed southern Ukrainian region of Crimea are as high as ever and stand the chance of boiling over at any point. Sunday is when a referendum to decide Crimea’s future will take place. As it stands, it is expected that Crimea’s citizens will vote that they rejoin the Russian Federation, a result that will only add to the region’s tensions. If things do go as planned, there is no saying what Crimea will look like in a week’s time.
Next week’s FOMC policy meeting is beginning to become a primary concern for investors, as it is likely that the meeting will result in yet another reduction to Quantitative Easing.
Slowing Chinese Economic Growth Beginning to Worry Investors
Seeing as the first few months of 2014 have offered nothing but consistently weak economic reports from China, it comes as no surprise that investors are beginning to develop doubts. Today, the slowing of China’s economy was made clear through yet another piece of economic data, this time it was the industrial output for January and February.
The market was expecting to see last month’s industrial output match the report we saw in December, though after only seeing 8.6% year on year growth, the doubters made their way to center stage. Not only did industrial output fall short of market expectations by more than a full percentage point, it showed a very visible slowing in China’s industrial sector. This news prompted the US Dollar to fall even further and increase safe-haven demand for gold and silver.
Now, the Chinese not only have their declining industrial sector to worry about, but also a slew of reports indicating that their financial sector is weakening as well. Despite the fact that poor Chinese economic data typically translates into a weaker spot value of gold and silver, all of these worries surrounding their economy are prompting investors to protect their money, or what’s left of it, in safe-haven precious metals.
The civil unrest and raised tensions in Russia are two more factors helping prod safe-haven buying along. With the escalation of violence seemingly only a few wrong words away, it now seems like it is not a matter of whether there will be armed conflict, but more of a matter of when it will happen. For this reason and many more, we will continue to monitor all of the latest developments stemming from the crisis in Ukraine.