Precious metals spent most of this past 5-day trading session losing value thanks to strengthened beliefs that the Federal Reserve will move to boost interest rates before the end of the year. All in all, this week was fairly lackluster from an economic data standpoint and mostly saw the US Dollar move forward most days. Currently, both the US Dollar and US equities are performing extremely well, and I do not see that changing anytime in the near future.
Paris Attacks Fail to Move Metals Much
Last Saturday, ISIS-connected attackers shocked the city of Paris, France by setting off multiple explosions and going on shooting rampages that lasted hours. With nearly 150 people now deceased, the world is in shock and quite fearful that other attacks may happen in the near future. Under normal conditions, these attacks would spark safe-haven demand for metals that would likely boost spot values. Currently, however, with investors convinced that interest rates will be hiked before the end of the year the spot values of gold and silver are having a difficult time moving anywhere other than downward.
You see, when there is a threat of largescale violence or war, investors retreat to precious metals in order to safeguard their wealth. Judging from the reactions in the wake of the Paris attacks, investors not only do not think a largescale war will break out, they also believe that raised interest rates are going to have more of an impact on the marketplace than any potential war with ISIS would.
Anti-terror operations are taking place all over Europe and the US in an effort to thwart any further attacks. These operations will be closely eyed by the market, but are thus far not having much of an impact on spot values.
US Housing Starts Fall, Housing Market Doing Well
A report published earlier in the week showed that housing starts in the US during October fell by nearly 2%. This is a bigger decline than what was expected, and was, for some, unsettling news. Fortunately, however, this poor batch of data was more or less offset by the fact that permits for new homes jumped up during October and are expected to continue to rise. Being that the Federal Reserve has, time and time again, maintained that the housing market needs to improve before rates are raised, this batch of data is being interpreted as being positive.
Finally, rounding out the week on Thursday was the minutes from the Fed’s October meeting. After picking the minutes apart, investors have come to the conclusion that the Fed seems intent on raising rates before the end of the year. Barring any major, unforeseen economic developments, conditions seem ok enough for rates to be risen. If you can remember, rates were reduced to near-0 levels back in 2008 in order to help the US economy fight back against the burgeoning global recession. Now that most are in agreement that the US economy has since recovered enough that rates can be lifted. The only fear tied with lifting rates, however, is the possible negative side effects it will have for US economic growth going forward.
As we look ahead to next week, I anticipate that things will be generally quiet as Americans gear up to celebrate the Thanksgiving Day holiday. Some economic data will trickle in, but the focus will remain on what might possibly be happening to interest rates in the US by the end of December.