Gold and silver spot values hovered around even for a majority of the day on Tuesday. Investors are continuing to mostly hold their positions as the world awaits a key meeting scheduled to be held by the European Central Bank this Thursday. With safe-haven demand no longer a major factor in the precious metals market, both gold and silver spot values have done little else apart from declining over the past week or more. The crisis in Ukraine is still very much in full swing, but with less violence and even less media attention, the marketplace simply isn’t as concerned now as they were a few weeks ago.
Add the lack of violence in Ukraine with the surging US Dollar and you have just described the perfect market atmosphere for gold and silver to be feeling a lot of pressure.
European Central Bank Policy Meeting Looms Large
Generally speaking, this week is posited to be a busy one from an economic data standpoint, especially with regard to Europe. Just today it was announced that the annual inflation rate for the EU during May only rose by roughly a half percentage point. This number fell short of market expectations and convinced even more people that the European Central Bank needs to do something in order to combat rising deflationary pressures.
This week is also playing host to an all-important European Central Bank policy meeting, of which is expected to emit a potentially markets-moving announcement. At this juncture, the wider investing marketplace is convinced that the ECB is planning to announce its latest plans for monetary stimulus in the wake of Thursday’s meeting. Despite the fact that some market analysts have been saying such things for the past few months, there has never been so many analysts, experts, and every day traders who believe that this time around will actually emit plans for fresh monetary stimulus.
If fresh monetary stimulus becomes a new feature in the European marketplace, all signs are pointing towards it having an adverse affect on the value of the euro currency. With more euros floating around the economy, the value of the collective whole will decline, thus giving the US Dollar ample room to make, or rather continue making, significant strides forward. As a result, it is also widely believed that a stronger US Dollar as a result of fresh stimulus will weigh on precious metals. None of this is set in stone, but it is a likely and quite believable chain reaction set off by the monetary stimulus the market is expecting to hear about on Thursday.
On the other hand, however, there are those traders who believe that stimulus will, as it has in the past, provide raw commodities, including gold and silver, with a healthy boost. At the end of the day, all of this is mere speculation. We will have to just wait it out and see what happens two days from now in order really gauge how precious metals will fare over the course of the next few weeks and months.
