Gold and silver spot values edged noticeably higher on Thursday, fueled by new safe-haven demand and short-covering by investors. This week has proven to emit little to no economic data and will likely remain quiet through the last day.
Last week saw the European Central Bank, in their meeting on Thursday, decide to finally implement new monetary stimulus. The ECB decided to both reduce the refinancing rate by 10 basis points as well as introduce a new -.1% deposit rate. This news prompted the euro currency to decline in value, but most people were expecting that. What did come as a surprise, however, was the uplift given to gold and silver. Apart from today, metals have not seen much of any gains made since last week.
Violence Begins To Flare Up In Iraq, Fuels Safe-Have Demand
Beginning towards the end of last week, it was reported that Kurdish rebels were at the center of a flare up of violence in Iraq’s north. Since then, the violence has only intensified as the rebels have since take over a large part of the northern part of Iraq, including a few key cities with populations totaling more than 4-5 million.
Now, as Iraqi security forces struggle to maintain order, there is no saying what the next few weeks hold in store for Iraq. The Iraqi government is pleading for US military support, though early indications is that those pleas will fall upon deaf ears. As violence becomes more of an issue in Iraq, safe-haven demand for precious metals is beginning to pick up. In fact, safe-haven demand for metals is being credited as the only reason metals are making such an impressive rally today. The real question, however, is whether or not today’s gains will be able to be retained through the end of the week and into next week.
While we’re looking forward, it is important to note that next week, in all likelihood, will bring about a bit more economic data than this week did. That data, combined with rising tensions and violence in Iraq will definitely make next week a bit more eventful than this week has proven to be.