This week was yet another turbulent one for precious metals thanks to a lack of fundamental, bullish news. Though we did not receive all that much information regarding global economic data, there were a number of crucial events that took place that are actively shaping the global economic atmosphere. At present, the overall outlook on precious metals is a fairly bleak one as many, many factors continue to stack up against gold and silver.
For now, spot values are well-below key price thresholds and are looking like they will stay that way. Risk-appetite amongst global investors is picking up and growing, and this will likely continue to negatively affect spot values.
Greece Accepts Austerity Measures
Perhaps the biggest news story of the week unfolded on Monday when it was announced that Greek negotiators came to an agreement with IMF and EU creditors regarding additional bailout funds. Despite last week’s referendum making it clear that Greek citizens do not want intense austerity measures, that is exactly what this latest deal involves.
Though an agreement was reached on Monday, it wasn’t until Wednesday when the Greek parliament voted to accept the deal. Overall, some drastic austerity measures are going to be put in place in exchange for Greece being given further bailout funds. Though most agree that this is not necessarily the best solution, we are confident in saying that this Greece situation will be on the back-burner of the marketplace’s attention.
Iran Deal Finally Going Through
After years and years of negotiations, Iran and 6 other world powers were finally able to come to an agreement regarding Iran’s nuclear ambitions. The deal, which is quite lengthy, will see Western sanctions lifted in exchange for tightened oversight on Iran’s nuclear program.
Despite Iran constantly saying that their nuclear ambitions are strictly for energy, most Westerners agree that Iran is actively trying to acquire nuclear weapons.
Though the exact details of this deal are still being ironed out, it is widely believed that one of the biggest aspects of this deal will see Iranian crude oil hit markets where it has been banned for decades. Thanks to the overall global supply of crude oil being glutted at present, the idea of Iranian oil on the market is something that is actively driving the price of oil downward. Being that oil and metals are two linked commodities, the falling price of crude oil this week has been dragging spot values down with it.
Yellen Hawkish on Interest Rate Hikes
Another big point of interest this week was Janet Yellen speaking to Congress regarding the future of monetary policy in the US. During her prepared speeches, Yellen made it clear that the US economy is more than prepared to incur interest rate hikes at some point before the New Year. Up to this point, the market was still pretty well divided with regard to when they thought interest rates might be hiked. Some were thinking that rates may not be hiked until next year, but now we can say with some confidence that rate hikes will happen sometime this year.
As is typically the case, the more hawkish attitude towards rate hikes is yet one more factor weighing on spot values. Because higher interest rates will cause investors to seek out interest-bearing assets, safe-haven gold and silver will naturally take a hit. Going forward, it is looking like it will be difficult for gold and silver to gain much of any traction. This is especially true so long as US economic data remains on the positive side of things. I am not sure what will help gold and silver gain any traction, but the near-term outlook is bleak to say the least.