Gold and silver continue their downward slide this week, posting losses that were far greater than anyone had expected. Two of the main reasons behind this slide were a rising US dollar and incredibly large surges in stock markets across the world. Investors fear that an announcement about the end of Quantitative Easing could further drive the price of gold right into the ground. We started this week with hoped of gold approaching the$1,500 threshold and now we wrap the week up praying that the yellow metal does not fall below $1,300.
World Stock Markets
The Japanese Stock market has been hitting multi-year highs all this week which has done a great job at devaluing both gold and silver. As more and more stock markets perform at the high levels we have been witnessing lately, investors are less interested in safe-haven investments like gold and silver and are much more interested in risk chasing in hopes of reeling in big profits from surging stock markets.
In addition to this, world currencies such as the Japanese Yen and the Australian Dollar are losing value relative to the dollar. Since the USD is gold and silvers’ main combatant, anytime it gains value like we have seen this week, gold and silver suffer. You may be wondering why these currencies are declining in value at such rapid rates, but the answer is simple; it is because of easy money poliies being implemented by central banks all across the world. Though we talked about the Yen and the Aussie Dollar, far more currencies than those two are currently being devalued.
A Word From the Fed
At the end of last week we saw rumors surfacing that spoke to the possibility of the US Federal Reserve ending its current Quantitative Easing program. While there is little fact backing this story up, many believe it to be true nonetheless.
Because both the US dollar and US stock markets continue to do well many experts believe that QE measures are no longer necessary. QE is used to weaken the USD, but because so many other central banks around the world are or have implemented their own QE measures, most of which are more aggressive than the US, the US Dollar is gaining value rather than losing it.
Moving Ahead
As we move into next week the main thing that will be on the minds of precious metals investors everywhere are the two stories talked about above. As of now, these two factors are putting more downward pressure on gold and silver than anything else.
It is about time gold and silver caught a break, though it doesn’t seem like this will happen.
Weekly Move
Gold started the week at $1,448 and ended at $1,360. This was a loss of about $88. Silver, on the other hand, started the week at $23.87 and finished around $22.26 . This was a loss of $1.61.