Gold and silver lost significant value this week as the European Central Bank meeting came to a somewhat shocking conclusion. Putting even more pressure on gold and silver was the string of extremely positive economic data released this week. As the US Dollar continues to gain value against the euro currency, gold and silver will have a very tough time making any positive gains.
ECB Meeting and Outcome
As is the case whenever the FOMC meets, speculation abounded in the lead-up to the European Central Bank meeting, which was scheduled to take place on Thursday. A week or so ago, many believed that the ECB would slash its key lending rate in an effort to spur otherwise stagnant economic growth. However, as the ECB meeting approached many investors and market experts began to believe that a shift in European monetary policy was unlikely.
For this reason, it was somewhat surprising when the ECB announced that it would slash its key lending rate by .25%. The new rate, which stands at .25%, caused the euro currency to decline while the US Dollar made substantial gains. As is the case anytime the USD makes substantial gains, heavy downward pressure was placed on gold and silver for the last two days of the week. Having dropped below the $1,300 mark for the first time in 3 weeks, gold is likely going to have trouble gaining anything substantial back in the early running of next week.
US Economic Data
Investors awaited both the 3rd quarter annualized GDP report as well as October’s employment report this week. First up was the GDP report for the third quarter, which showed that the US’ GDP had grown by 2.8% on an annual basis. This was much better than market expectations of a 2%-2.5% rise.
October’s employment report was even better than the GDP report, as figures came in twice as good as what was expected. Compared to a market expectation of a rise in non-farm payrolls of 120,000, the employment report showed that non-farm payrolls rose by over 200,000. This news strengthened the growing belief that the Federal Reserve may taper QE before the end of the year.