October 23rd Midweek Silver Market Update

Though they have suffered a bit of a corrective pullback today, both gold and silver are still in the midst of what has already been shaping out to be a very positive week. The US government shutdown is finally behind us, though that does not mean we are finished talking about it, and for good reason too. The shutdown is anticipated to have negatively impacted US 4th quarter GDP growth, and such investors are paying close attention to the delayed economic reports released this week as they will paint a better picture as to the current status of the US economy.

China is making the news with problems of their own, as interest rates have been on the rise for the last few weeks. This has caught the attention of investors around the world as almost everyone is waiting to see if and how the Chinese government will respond.

Rising Chinese Interest Rates, Housing Prices

Short-term interest rates were reported to have been on the rise in China, a situation which is a cause for concern amongst Asian and European investors especially. With interest rates rising, it begs the question of whether or not Chinese monetary officials will choose to tighten their current policies. It is merely speculation at this point, but if China does tighten its monetary policy, overall demand from the world’s second largest economy will undoubtedly decrease. This means that precious metals consumption in China will be hurt.

Also worth mentioning is the rising housing prices in China. This is not as big of a concern for investors, though it clearly illustrates that the US is not the only country facing troubled times economically.

Delayed US Economic Reports Surfacing

As everyone is well aware, the government shutdown effectively put the US economy on hold as well. This caused the many economic reports we see during the course of a typical month be put on hold. Now that the shutdown has passed, many of these suspended reports are beginning to trickle their way into the spotlight. The first of these reports was the jobs data from this past September. Though the market was expecting to see a rise in non-farm payrolls of almost 200,000, actualy figures came back over 50,000 weaker. Despite this, the overall unemployment rate was still able to fall from 7.3% to 7.2%.

Even though the unemployment rate fell, investors in stocks and the US currency immediately began selling after the weaker than expected jobs data was released. Investors will not dwell on September’s jobs data for too long, as October’s reports are just around the corner.

For the moment, long-term implications for gold and silver are positive. With the possibility of facing another government shutdown in a few months, and 4th quarter US economic growth likely to be hindered by the shutdown, investors are turning more fervently to the safe-haven investment that gold and silver both are.

Posted in Market News

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