Gold and silver spot values are trading a bit higher on Friday, but are on course to end this week having posted their most significant weekly losses thus far this year. After last weekend’s referendum in Crimea failed to spill over into violence, the marketplace almost immediately lost interest. This sounds a bit morbid, but could not be any truer. By the time markets opened on Monday, the spot values of both gold and silver were already trading down thanks to a lack of safe-haven demand for metals.
As interest in Crimea began to dwindle, investor interest in this week’s FOMC meeting began to perk up. Despite nothing too out of the ordinary expected to happen as a result of the latest FOMC meeting, the market was intrigued nonetheless.
Crimea Shifts Quickly To The Back Burner
Rewind to a week ago and the entire investing world was very much concerned with the pending referendum in Crimea. Scheduled for last Sunday, the referendum was the deciding factor for whether or not Crimea would remain part of Ukraine. As expected, an overwhelming majority of the citizens of Crimea, like their parliament, voted in favor of rejoining the Russian Federation. This was big news, but was not very shocking as Crimea is dominated by ethnic-Russians. What was shocking, however, was the lack of violence that came as a result of the referendum.
Most people were expecting some sort of large-scale violence to break out along the Russian-Ukrainian border and that simply did not happen. After the market came to the realization that no violence would come as an immediate result of the referendum, safe-haven demand for gold and silver dropped off almost completely. As it stands, the crisis in Crimea is still very much on the back burner and is not so much a pivotal factor in the decision making of investors.
FOMC Tapers QE Again
As is always the case, the market quickly became preoccupied with the possible outcomes of this week’s FOMC policy meeting. As expected, the FOMC decided to taper monthly bond purchases by another $10 billion, bringing QE down to $55 billion/month.
While the $10 billion tapering decision was nothing too surprising, what newly appointed chairperson of the Federal Reserve had to say in her post-meeting press conference caught some off guard. In her comments to the press, Janet Yellen said that interest rates in the US may be risen as early as this time next year. This caught investors by surprise due to the fact that tapering is only expected to finish up at the beginning of next year. Interest rates rising so dramatically in the immediate aftermath of the absence of tapering is something investors now have to prepare themselves for.
In the wake of this week’s Fed activity, the US Dollar was given a significant boost.