Gold Spot Price Open: $1,330
Gold Spot Price Close: $1,353
Change in Gold Spot Price: +$23
Silver Spot Price Open: $19.44
Silver Spot Price Close: $20.04
Change in Silver Spot Price: +$0.60
Precious metals ended up continuing to gain on Tuesday, making nice strides forward to officially open the week. When all was said and done, gold picked up about 23 dollars while silver added right around 60 cents. Platinum and palladium both gained on the day as well, with both metals up by more than ten dollars.
ECB Easing Running Out of Time
For those who have been paying attention, the European Union has now been pursuing quantitative easing measures for the better part of the past year. QE, as it has come to be known, works by seeing the European Central Bank purchase billions of dollars’ worth of bonds and other assets in an effort to pump the economy with money, thus devaluing the Euro and encouraging spending. So far, QE measures in Europe have been met with mixed opinions. On one hand, there are those who feel as though QE will not have an immediate impact, and so far hasn’t. On the other hand, however, there are those who are looking at QE’s perceived ineffectiveness up to this point and saying that the plan should be abandoned.
In less than half a year’s time, the European Central Bank will be forced to decide whether it is going to continue—and possibly even expand—QE, or end the program altogether. Right now, inflation in Europe is still almost as weak as it was when QE was first begun. In addition to this, there is a fear that the real impact of the UK’s departure of the European Union has not yet come to fruition. Because of these two realities, there is an overarching belief that ECB president Mario Draghi and his colleagues will move to expand the asset-buying program, which now purchases almost $2 billion worth of bonds every month.
This may be the first you are hearing of European QE in a while, but it most definitely will not be the last you hear of it. Over the course of the coming months we will be calling our attention to Europe more frequently as the policy will be put under the magnifying glass.
Dollar Continues to Weaken as Rate Hike Expectations Fade, Data Misses Mark
Though it was never really believed by many people that interest rates in the US might be raised this month, any hope that existed at all has effectively been dashed. Since the poor jobs data and poor manufacturing data that was dealt last week, investors have been slowly but surely coming to terms with the fact that interest rates are not moving anywhere quickly.
This is having a negative impact on the Dollar, which lost ground against rival currencies again on Tuesday. For gold and silver, however, this might be the start of a rally the likes of which we have not seen since earlier in the summer. So far this week small gains have been made, but there are many people who believe that this is just the start of a more elongated rally. It will be interesting to see how metals fare throughout the rest of the week, but this is most definitely a great start.
Things are going to continue to look up for precious metals thanks to a weaker reading from the service sector of the US economy; of which the US economy is primarily comprised. The Institute for Supply Management’s reading on non-manufacturing activity in August came back almost 4 points weaker than was recorded in July, and that only served to push the Dollar even lower. Officially, August’s ISM non-manufacturing index reading came in at 51.4, which is a far cry from the 55.5 recorded in July. This pushed the Dollar even lower and mightily contributed to the positive day for metals.
Wrap-Up
Gold and silver gained for a second day this week, and things are beginning to look up for investors. As oil prices fall and the Dollar continues to weaken, it will be interesting to see how gold reacts. There is not a wealth of economic data on offer for the rest of the week, but with the summer now officially over market activity will pick up significantly from where it was throughout most of August.
