Gold and silver opened up trading in positive fashion for the third consecutive day on Friday. For the week, spot gold is up well over $40/ounce while silver is on its way to improving by a whole dollar for the week. The reason for gold and silver’s upward trend this week? Look no further than safe-haven demand stemming from worries with regard to the Chinese economy as well as tensions throughout the Crimea region of Ukraine.
Next week’s FOMC meeting is already beginning to spark speculation, though most of the market agrees that the Fed will taper, but only by the $10 billion we have grown accustomed to thus far in 2014.
Tensions In Crimea Steadily Increasing, Referendum Sunday
Last week, the crisis in Ukraine shifted to the back burner of the market’s attention as it seemed political leaders were on the verge of ending the turmoil through diplomatic means. Over the weekend, however, eyewitness and video reports showed the world of an increasing pro-Russia military presence in the region. Caravans of unmarked armored vehicles, most of which were manned by masked men, made their way through Crimea and occupied all sorts of buildings and compounds along the way.
The increased pro-Russia military presence happening only a week before an all-important referendum that is supposed to decide the fate of Crimea has only worked to unnerve the world. The investor response from what has developed in Ukraine this week is one of risk-aversion. Many investors were seen trading in riskier assets and instead placing their money in safe-haven gold and silver as it is usually a great resource in times of civil unrest.
As we head into the weekend the real important date is this Sunday, when the referendum is scheduled to happen If Crimean citizens do vote to rejoin the Russian Federation, there is no saying what the outcome of that decision will be, but it is looking more and more like military action will be pursued.
In other news, the upcoming FOMC meeting will be of particular importance to investors as well. It is expected that the Fed will continue with their reduction of monthly bond-buying, but there is a bit of a difference of opinion with regard to how much the Fed is going to reduced Quantitative Easing. A strong contingent believes that the FOMC will continue along with another $10 billion reduction to QE, though others think that the reduction may be even more significant. Though it is unclear what kind of decision will come as a result of the FOMC’s meeting next week, we do know that the meeting will be watched carefully by investors from around the world.