Gold will post a weekly loss for the first time in a month and a half after a busy 5-day session. The big news of the week came in the form of another Federal Reserve of the United States decision to taper its primary monetary policy, also known as Quantitative Easing, by another $10 billion per month. In other news, periphery currencies from places like Turkey and India have been under a lot of pressure from the worldwide equity sell-off as well as the Fed’s most recent decision.
Next week will bring with it a boatload of US economic data as to give investors plenty of ammo to take shots at the Fed’s tapering move. The Chinese (and most of Asia) began celebrating the Lunar New Year today which means that trading from Asia will be muted for the first few days of next week.
Dollar Surges Forward on Fed Decision to Taper
As it stands, there is only one clear-cut winner coming as a result of the Fed’s decision to cut QE by another $10 billion monthly; the US Dollar. Ever since the decision was announced on Wednesday afternoon the greenback has been given new life and is gaining value at every turn. Of course, helping the USD along its upward path are declining stocks and decreased interest in currencies from places like South Africa, India, and Turkey. In fact, the sell-off of the aforementioned currencies was so great in the early parts of this week that the Turkish central bank, among others, was forced to call an emergency meeting and as a result raise lending rates. This move did well to calm the sell-off of currencies and world equities, though both entities are not quite out of the woods yet.
In the immediate lead-up to the Fed’s announcement gold and silver were trading up, but only a day later it was clear that safe-haven demand was not nearly strong enough to counteract profit-taking by investors. Through gold was able to cross the $1,270 threshold on two occasions this week, the metal’s spot value is now closer to $1,240. Silver too is edging lower, closer to falling below $19. Investors in precious metals will be paying close attention to next week’s helping of US economic data as it will likely have some sort of impact on the spot values of metals going forward. Despite the fall in value during the last two days of the week, many market analysts are convinced that safe-haven demand for precious metals will be on the rise over the course of the next few weeks and months.
Despite gold posting losses today, the overall outlook on precious metals is looking better now than it did a few weeks ago.