Precious Metals traded upward for a majority of the day today, fueled by some risk-aversion as the result of some raised tensions in Ukraine. Though this week is note expected to bring about too much in the way of economic data, some European second-quarter reports were made public before US markets opened today. As we head into the latter stages of this week, I expect that the market will continue to focus on the tensions in Ukraine as well as the progress, or lack thereof, of US equities. Stocks fared well today, but were definitely limited due to the market’s shifting focus.
Safe-Haven Demand Back, For Now
Safe-haven demand for precious metals was seen making a comeback during the early parts of today on news that Russia is building up its military presence along the border with Ukraine. Though this story has been building since Monday, NATO officially announced today that Russia has massed nearly 20,000 combat-ready troops along its Western border with Ukraine. Though they have not crossed over into Ukraine as of the writing of this post, many experts feel as though a Russian invasion based upon the pretext of a “humanitarian” effort is imminent. For this reason, it is no surprise that the market has begun to shift their focus to this one geopolitical development.
Not helping European equities at all today were a few reports stemming from specific EU countries during the second-quarter of this year. Foremost among these reports was one claiming that the Italian once again experienced contraction during this year’s second quarter. In addition to that, German industrial orders fell in June at their sharpest rate since 2011.
In response to the poor EU economic data, the Euro currency declined even further against the USD. As of the last month and a half or so, the US Dollar has been performing extremely well, making almost continuous gains. As the Federal Reserve continues to tighten monetary policy, and the ECB continues to loosen theirs, it is likely that the greenback will only continue making gains against the Euro as the rest of this year plays out. As the Dollar gains more momentum and value, the selling pressure will naturally be placed on precious metals, including gold and silver.
As the rest of this week plays out, it is likely that investors will continue to focus on the developing situation playing out along the Russia-Ukraine border.