Gold and silver have performed significantly better in the first two days of this week than they have during any two-day period over the past two weeks or so. Gold having picked up over $40 and silver gaining a little more than a dollar means that neither metal is in as dismal shape as they have bee recently. A weaker US dollar and heightened crude oil prices have caused a rise in the belief that market bears have finally lost their momentum.
With the December FOMC meeting looming, however, the bears abdication of power may only be temporary in nature.
Mario Draghi Makes Deflation Comments
President of the European Central Bank, Mario Draghi, made some comments with regard to inflation in Europe in the early parts of Tuesday. His comments were positive as he expressed a confident feeling that the EU will avoid a period of deflation. Thanks to the ECB's recent decision to slash the region key lending rate, inflation has risen slightly in recent weeks and is looking like it will continue to rise over the course of the coming months. Japan, on the other hand, appears to be staring directly in the face of a deflationary period.
FOMC Meeting Looming
The December installment of the Federal Open Market Committee's policy meeting is scheduled for next Tuesday and Wednesday. While every FOMC meeting for the past 7 or 8 months has captured the undivided attention of the world marketplace, this one is of the utmost importance. Despite the marketplace having thought for some time now that QE will be tapered at one of the FOMC meetings, the notion that a tapering announcement will be made at this meeting is as strong as ever. With recent US economic data being as positive as it has been, many investors and market experts feel as though the Fed has no choice but to announce tapering at this upcoming meeting.
With that being said, however, market experts are beginning to feel as though a tapering announcement, when it comes, will not impact the market as drastically as once thought. The reason for this is because we have been expecting QE to be tapered for more than half of a year. During that time the gold and silver markets have adjusted and are more or less in the same position now as they would have been if tapering was announced a few months ago. Because the market has been anticipating tapering for such a long time, it won't come as a big surprise when the announcement is finally made.