Gold and silver had positive weeks, though the gains both metals made were nothing extraordinary. After the early week brought us the delayed employment report from this past September, its weaker than expected figures initially helped boost spot values considerably. However, in the following few days, profit-taking and technical corrections saw both gold and silver stagnate for the most part.
Rising short-term interest rates as well as an overheating housing market in China are causing investors to pay more attention to the Asian marketplace. With that being said, all news out of Asia is not worrisome, seen in that this week yielded some generally upbeat economic reports.
China Inching Towards the Spotlight
Since the government shutdown has finally passed, this week called for investors to focus their attention somewhere other than the Continental United States. The big draw this week was the rapid rising of short-term interest rates and the overheating housing market in China. If the rise in interest rates is sustained over a longer period of time, market experts are beginning to think that there is going to be a need for Chinese monetary officials to tighten monetary policy. If this is the case, it is believed that overall consumer demand out of China will be diminished significantly. Such a decrease in demand could cause the spot prices of gold and silver to decline as China is a particularly large consumer of precious metals, being that they are the world’s second-largest economy.
As far as economic data out of China is concerned, it was quite positive. For one, October’s manufacturing PMI for China rose by almost a whole point when compared to September’s. Such an increase is indicative of a growing economy and helped boost most markets, including the precious metals market.
Over the coming days and weeks we will continue to analyze the ongoing interest rate scenario in China to see if, how, and when it will affect the precious metals market.
US Dollar Losing Value Steadily
The US Dollar has been steadily declining in value since the government shutdown came to fruition at the beginning of the month. Even though the shutdown has passed us, the Dollar is suffering due to the expected negative consequences that the government shutdown will yield in regards to 4th-quarter GDP growth.
This means that in the immediate future, the outlook on the US Dollar is a bleak one. While the euro had initially been the recipient of large gains in the wake of a declining US Dollar, weaker economic data out of Europe this week has slowed down the euro’s progress.