Gold and silver have added to last week's losses during the first half of this week thanks to technical selling pressure being placed on precious metals. The US Dollar has surged to a near 2-month high, something that is always going to be adversarial to the prospects of precious metals.
Last week's ECB policy meeting yielded a surprising outcome, one which was also none too positive for precious metals. Over the course of the upcoming weeks and months investors will focus on any and all US economic reports as they will likely have some sort of impact on the spot values of precious metals.
Recently Strong US Economic Data
While last week saw investors mainly focus on the European Central Bank policy meeting, there was also plenty of US economic data for them to digest. The reason investors continue to focus so heavily on US economic data is due to the fact that the Fed may still taper Quantitative Easing before the end of the year. Most members of the Fed agree that more consistent, strong economic data is needed before a decisive move can be made with regard to Quantitative Easing.
Last week, consistently strong economic data was exactly what investors saw as both the 3rd-quarter GDP report and October's employment report came back much better than expected. First up was the 3rd-quarter GDP report, which indicated that US GDP rose by 2.8% on an annualized basis. This news was seen as extremely positive due to the fact that the market expected to see a rise of only about 2%. On Friday, October's employment report was released and, like the GDP report, it too showed numbers far better than what the marketplace had anticipated. Non-farm payrolls rose by over 200,000, compared to an expected rise of 120,000. This news was beneficial for the US Dollar, which rose significantly throughout the whole of last week.
Apart from US economic data, last week's marquis event was the European Central Bank policy meeting. Investors were so concerned with the ECB meeting because it was mildly anticipated that Europe's key lending rate would be slashed. With inflation rates extremely low and economic growth outside of Germany nothing to write home about, there was a strong contingent who believed that the ECB had to make some sort of policy change.
The outcome of the meeting was that Europe's key lending rate was reduced to .25%. This caused the euro currency to rapidly decline and gave the US Dollar even more strength. Even though Europe loosening monetary policy is technically good for precious metals, the overwhelming strength of the USD prevented gold and silver from making any gains last week and in the early parts of this week.