Gold and silver started off Tuesday down a bit as precious metals are not looking as safe of an investment as they usually are. Economic indicators from around the world have caused many market experts to believe that easy money policies from around the world may have only a limited lifespan. Any news which alludes to the fact that easy monetary policies in places like the US and Japan might be coming to an end are negative for most commodities, including gold and silver.
Bank of Japan Meeting, US Economy
Yesterday, the Standards & Poors credit rating organization shifted their view of the US credit rating from negative to stable. This small, yet important shift is a big indicator that the US economy is doing much better than it was only a year ago. This news, coupled with the fact that employment is at near-normal levels, means that Quantitative Easing in the US might have its days numbered. This is all despite the fact that St. Louis Federal Reserve president, James Bullard, stated that he thinks monetary easing may stay in effect for a little while longer than this summer.
The Bank of Japan, in their meeting this week, announced no major changes to their monetary policy which has actually caused many people to believe that it central bank too might end easy money policies in the near future.
European Bond Outlooks
Bonds and stocks from around the world are in the midst of a strong urge to sell by investors from all over the world. Most recently, Greek government bond yields have been approaching 10% and are looking like they will be sold in droves today.
Rising bond yields in general hurt the European stock market today, especially in already bleak economic areas such as Spain and Italy. If that wasn’t enough, even bond yields in Germany were rising slowly at the beginning of the day. In the middle of all this bond chaos, courts in Germany are in the process of deciding if the EU’s present financial bailout package is even legal in Germany. This is a decent bit of information to take in, but it all points to the fact that the crisis that has been hovering over Europe may quickly evolve into a whirlwind. Like we have been saying for months, someone or some group needs to take control in Europe because things are beginning to get out of hand there.
Another aspect of the world marketplace that is not doing gold and silver any favors is the fact that physical demand for the metal is inordinately low. In places like India, where gold is typically flying off the shelves at any and all times, demand for the yellow metal is at a shockingly low point.
What Else to Watch For
As we move forward into the duration of the week, one of the major things we will watch out for is how the world marketplace is viewing precious metals. As of now it is not being looked at as a safe-haven asset, something that is essential for sustaining a higher value.
European bond yields will undoubtedly move gold further on the day, but it will be interesting to see if today’s bond and stock activities will carry over into tomorrow.