Gold and silver have suffered significant losses this week after a somewhat surprising outcome from the European Central Bank meeting. Not only that, but this week saw the US Dollar make significant gains against the euro currency,
All US economic data released this week was positive, giving more strength to the notion that the FOMC may need to taper QE before the end of the year.
European Central Bank Meeting
European Central Bank policy meetings can be accurately equated to FOMC meetings in the US. This week’s ECB meeting was greeted with a large amount of speculation due to the fact that there was a strong contingent of investors and market experts who believed that the ECB would slash its key lending rate.
When the meeting did take place, not too many people were surprised to see the ECB cut its key lending rate by .25% to .25%. This news initially helped boost the spot values of gold and silver, but after only a short while all gains were reverted due to a declining euro currency. The euro’s decline prompted the US Dollar to make substantial gains, which in turn put heavy downward pressure on gold and silver.
In other news out of Europe, Standard & Poors credit agency reduced France’s credit rating to a new rating of AA. Standard & Poors cited France’s inability to keep control over their government spending as the reason for the credit rating reduction.
More Positive US Economic Data
After the end of the recent government shutdown many had expected subsequent US economic data to be poor. However, the opposite has proven to be true as most economic reports since the shutdown have been positive. This week alone saw two incredibly important reports come in far better than expected.
First was the annualized 3rd-quarter GDP report. While the marketplace expected GDP to rise by 2%-2.5%, actual figures came in closer to growth in the neighborhood of 2.8%. Today, on the last day of the week, October’s employment report was released. The market had expected non-farm payrolls to rise by about 120,000 but actual figures showed a rise of over 200,000. This beat expectations by a long shot and strengthened the belief that the Fed may taper QE before the year’s end.