For the third consecutive day this week, precious metals spot values were edging lower and feeling added pressure from technically related selling. As it stands, silver is just barely hovering above $19/ounce while gold is holding steady somewhere in the neighborhood of $1,250/ounce. The last few days of this week are not expected to yield too much in the way of economic data and investors will more than likely hold their positions ahead of next week’s ECB meeting.
The crisis in Ukraine is continuing to deescalate and fade to the background of the marketplace’s attention. Last weekend, Ukraine saw its first official presidential elections since Yanukovich was ousted and the early results are pointing towards Petro Poroshenko as the likely person to take office as president of Ukraine. Despite Poroshenko making it clear that his intentions are to work with both Russia and the rest of Europe in order to bring back a sense of normalcy to Ukraine, pro-Russian rebels are still taking up position in large parts of the southern and eastern regions of Ukraine. Up until recently, the widespread violence between rebels and the Ukrainian military was fueling safe-haven demand for gold and silver. Now, however, investors are becoming more or less disinterested with the crisis as it has not changed much at all in the last few weeks.
US GDP Data Falls Short of Expectations
Despite most recent US economic data coming in on the positive side, today’s preliminary first quarter GDP report for the United States disappointed most who were paying attention. Officially, the US’ first quarter GDP was down 1%, a number that fell short of the positive growth expected by the market. While this poor data did well to slow precious metals’ decline this morning, that slow down was only temporary as metals’ spot values were on the decline once again by the mid-afternoon.
The final day of this week is expected to be quiet as most investors, especially those in Europe, await next week’s European Central Bank policy meeting. Currently, the wider market is expecting to see the ECB implement, or at least discuss the implementation, of some sort of new monetary stimulus policy. Recently growing deflationary pressures are causing the European marketplace to become jittery and apprehensive with regard to the next few months. Under normal conditions, new monetary stimulus measures implemented by the ECB would be beneficial for the spot values of precious metals. Currently, however, we aren’t dealing with normal conditions and a large number of market experts believe that new ECB stimulus will end up hurting spot values more than it would help them.
The reasoning for this is due to a chain reaction of a few events. Typically, monetary stimulus in Europe will work to drive down the value of the euro currency. Once the euro has declined in value, it is a strong possibility that the US Dollar will make significant and noticeable gains. So long as the USD is edging higher, it will be difficult for gold and silver to make many gains without the help of some other, bullish news. It will be interesting to see how these next few weeks play out because as of now it is looking like metals are on their way to pegging lower in value.