Both precious metals and American equities experienced a growth this past week as good news on both sides of the Atlantic boosted investor confidence. Many hope this is a sign of things to come, as they look toward the soon-to-be-held G-20 meeting.
American stock indices rose steadily all week through mid-day trading Friday, which showed a little volatility. The 18th marks the third Friday of the last month of the quarter – the day on which stock index futures, stock index options, stock options and single stock futures expire concurrently. Having come to be known as the “quadruple witching,” the event usually triggers a slightly higher level of trading activity in American markets, raising volatility, but usually is of little consequence. U.S. investors were otherwise encouraged both by the end of a several month dispute over a reciprocity contract between CVS and Walgreens pharmacies. Both chains were rewarded Friday with gains of over 3%. Also helping American markets was recent European activity.
An announcement by Spanish officials earlier in the week that results of “stress tests” on individual banks would be made available to the public, thereby increasing transparency, came as a surprise to many investors this week. What’s more, ECB President Jean-Claude Trichet followed suit by saying similar assessments of banks’ in the broader (European) region ability to withstand financial shock would by published by the second half of July at the very latest. This assurance was manifested in a successful auction of Spanish bonds on Thursday – a signal many hope, that things are turning around for Europe.
In spite of positive performance in both American and European markets, precious metals rose steadily this week, with gold reaching a record high yet again.
• Gold: Gold traded as high $1,261.40 Friday as gold enthusiasts celebrated Spain’s successful bond auction. As the nation was able to raise funds through the sale of bonds, it will not be forced, as previously anticipated, to sell gold. Further to this, safe haven buying continued as American investors prepared for both the quadruple witching Friday and the weekend.
• Silver: Repeating last week’s trend, silver followed gold up the charts this week, reaching $19.30/oz. on Friday. Investors anticipating an increase in consumer spending as a result of this week’s equities market improvements bought in to capitalize on the metal used in the production of many modern electronics.
• Palladium & Platinum: Palladium and Platinum both trended upward this week reaching $497.00 and $1596.00 respectively. These metals remain to most speculative buyers a way to ride the recent precious metals wave from a distance. Historically speaking, these prices are not nearly as volatile as gold and silver, but tend to trend in a directly proportional fashion.
Such safe haven buying will likely continue as investors are apprehensive over the outcome of the G-20 summit in Toronto next week. As President Obama encourages China to allow the Yuan to appreciate against the dollar, the most likely outcome of the meeting is a shift in foreign exchange, which typically rocks global markets.