Gold and silver posted solid gains yesterday as the Federal Reserve Open Market Committee reaffirmed its commitment to monthly purchases of $85 billion worth of bond and mortgage-backed securities. Prices are softening today due to discouraging data from Europe, where Germany reported weak retail sales and an increase in unemployment. Italian bond yields jumped as well, which pressured the euro lower. The dollar is stable today, and oil slightly lower after hitting recent highs – both unfavorable to gold.
The stock market is focused on earnings today as it awaits the Friday non-farm payroll report. The surprise report yesterday showing that fourth quarter GDP shrank 0.1% helped precious metals, but the market mostly discounted the data. GDP was expected to have grown 1.1% in the fourth quarter. The drop was attributed to a large decrease in government and defense spending. Had those levels remained at Q3 levels, Q4 GDP would have been up 2.6%. This may suggest that the economy may be approaching the point where it could absorb decreased government and defense spending without dropping into recession.