Gold and silver disappointed investors yet again this week as both metals waited until the last day of the week to post their biggest daily losses. This week featured a few more interest rate cuts as well as poor economic news out of China which has caused some to question the strength of the world’s second largest economy. If it weren’t for a solid run by the US dollar gold and silver might have posted positive gains this week, but such was not the case.

China Fading

China is seemingly beginning to fall off as the second biggest economic power as the nation is continuing to produce poor economic report after poor economic report. This week was no different as during the midweek it was announced that the Producer Price Index for this past April was far lower than originally anticipated. Many people are looking to this report as direct evidence as a China who is begin to stagnate economically.

The second poor report out of China was that inflation rose by two tenths of a percentage point more than expected this past April. Increased inflation has caused many to speculate that the nation’s central bank may tighten their current monetary policy. The purpose of tightening monetary policy would be to ward off any future, unprecedented rises in inflation.

Finally, even though there are a number of poor economic reports circling around China, physical demand for gold remains at all-time highs. To put things in perspective, the thirty tons of gold that was sold in Hong Kong at the end of last April was over 50% more than was recorded at the same time last year. So long as the price of gold remains subdued physical demand is going to remain so high that retailers will continue to liquidate their stock as soon as it arrives.

Fighting the Dollar

Perhaps the major reason why gold is unable to make any sort of lasting comeback from its losses the other week is due to the fact that the US dollar is doing extremely well. Whenever the dollar is doing well gold always seems to act in opposite fashion and that much has rung true yet again this week.

It is unlikely that the dollar will weaken significantly in the coming weeks either as currencies all over the world are currently being weakened at alarming rates. The dollar has no choice but to grow in value which will inevitably cause gold and silver to suffer.

Moving Ahead

Looking forward into the next week of May the main thing that precious metals watchers will keep their eyes on is the value of the US dollar. Right now the USD is having the biggest influence on the price of both gold and silver.

Weekly Move

Gold started the week at $1,471 and finished up at $1,447. This was a loss of $24. Silver, on the other hand, started the week at $24.20 and by the time markets closed on Friday it was at $23.87. This was a loss of 33 cents.