August 13th Early Week Silver Market Update

Gold and silver, after posting some impressive gains on Monday, were brought back down to earth on Tuesday thanks, in large part, to a corrective pullback. Almost always, without fail, whenever precious metals post fairly large gains one day, the next day features a weaker price, even if only slightly weaker.

Investors are awaiting a US retail sales report which is expected to be positive for the overall US economy. Also in the news is a bit of European economic data, all of which is surprisingly positive for the Euro Zone. After gold hit a near 3-week high on Monday, investors are hoping they can ride this wave to more gains by the time markets close on Friday.

Gearing Up For Positive Economic Data

Retail sales in July were reported as being up by about .2%. This marks the fourth consecutive month of positive results out of the United States’ retail sector. This report will likely give those who believe QE should be wound down soon more confidence going forward. A growing and flourishing US economy is great for the American people, though not so great if you have a vested interest in precious metals such as gold and silver.

The current monetary policy of Quantitative Easing works by overloading the economy with paper money which thus brings down the greenback’s value and as we are all aware, a decline in the value of the US Dollar almost always translates into a higher spot value of gold and silver. If QE is tapered out or even done away with entirely it could be the impetus for a decline in the value of both gold and silver. The Federal Reserve, the government body in charge of monetary policies in the US, has recently been heard making contradictory comments regarding the future of QE and thus it is wholly unclear what will happen to the monetary policy going forward, if anything is going to happen at all.

European Economies Continue Upswing

Last week marked the first time in a while we were able to report positive news in regards to the general European economy. The good news continues as the most recent economic report indicated that industrial output for the European Union rose by .7% over the time period of May to June. Overall industrial output for the second quarter of 2013 was up by over 1% when compared to the European Union’s first quarter.

Additionally, the heavily watched German ZEW economic expectations index posted a higher reading in August than was recorded in July. August’s reading came back at 42.0 while July’s reading was 36.3. While these numbers may not mean anything to you, all you need to know is that a reading of 42 is much more suggestive of a growing economy than any reading in the 30s. Apart from Greece, the majority of Europe is seeing the prospects of their economies begin to look up for the latter half of 2013. It will be interesting to see if the positive economic readings continue or if Europe will revert back to their old ways, the ones we have grown accustomed to thus far in 2013.

Physical demand for gold and silver has been up since the back end of last week and is continuing to grow.