As of midday on Wednesday, both gold and silver were trading sideways, still hanging on to the gains they made through Monday and Tuesday. In case you missed it, the first two days of this week have been quite busy from an economic standpoint. Though there has not been too much economic data made public, there has been a good amount of price action on the part of asset classes that have direct influence on gold and silver. Among the big movers this week are global equities as well as crude oil.
As it stands now, gold is sitting comfortably above $1,200/oz while silver has finally, once again eclipsed the $17 threshold. Though these spot values are nice, they are still a far cry from where we were a few months ago and still considered to be at bargain levels. This, coupled with safe-haven demand, is sure to keep the physical purchases of gold and silver continuing to be on the up and up.
Crude Oil, Global Equities Take Center Stage
As you my or may not know, investors find plenty of information to latch on to, even in the midst of an absence of markets-moving economic data. This week, the price action of crude oil caught the attention of investors yet again, simply because prices continue to falter. As it stands now, crude oil is hovering near a 5-year low and is not looking like it is going to improve any time soon.
At first, the downward shift of crude oil was not all that alarming simply because most people assumed that oil’s spot value would quickly correct itself. Now, however, we come to realize that crude oil may be doomed to remain at current price levels because of the injection of US-supplied crude oil hitting the market. Now, there exists a global supply glut that is currently driving down the price of US-supplied oil.
In addition to this, the fact that US oil is coming from a country that is not affected by wars eliminates the existence of something called a war premium. In the past, so-called war premiums had the power to drive up the cost of a single barrel of oil by up to 25%.
Now that oil has stopped acting as a weight on the value of gold and silver, it will be interesting to see if safe-haven demand and bargain-hunting is enough to keep spot value propped up.