This week was turbulent, to say the least, for major trading indices. Not only did the Dow drop below 10,000 – a major psychological marker for many investors – but the Euro took a similarly daunting dive, and precious metals responded accordingly.
American stock indices plunged this week as ongoing concern over the gulf oil spill, and BP’s inability to do anything about it, shook investor confidence. Specifically, observers question the magnitude of the eventual clean-up costs imposed on the oil giant, and whether they will force BP North America to seek the shelter of a Chapter 11 bankruptcy filing. BP’s stock plunged early in the week, dragging a few other energy stocks with it. As a result, the Dow, Nasdaq, and S & P, started to drop mid-day Monday, and bottomed out early Tuesday below the 9,800, 2,150, and 1,045 marks respectively.
Similarly, the Euro experienced considerable declines earlier in the week. Shaken by general continuing apprehension over the future of the currency, a German newspaper released a report that the European Central Bank was readying a bailout package for Spain “should they need it.” The Euro dropped to $1.18 earlier in the week – a level not seen since the currency’s debut over 10 years ago. Levels rebounded slightly however, after ECB President Jean-Claude Trichet announced that the bank would continue to maintain liquidity by offering three-month emergency loans through September.
In direct response to these historic declines, precious metals rose to unprecedented standings.
• Gold: Tuesday marked yet another record day for Gold. Safe-haven activity in global commodities markets pushed the metal to $1,245.60 – the highest price ever demanded of gold. These gains subsided somewhat after the Euro rebounded, but continued to trade over the $1,220 mark well into Friday’s activity.
• Silver: Silver followed gold’s rise this week trading at over $18.25 Tuesday. While most PM attention was absorbed by gold earlier in the week, those not willing or able to take the plunge considered silver closer to Friday as a cheaper alternative with healthy gains. Silver continued to trade high even after gold returned to last week’s averages.
• Palladium & Platinum: Palladium rode the PM wave this week further than gold, silver, or platinum. It gained over 7% early in the week, likely due to its relatively low cost and high demand on world markets. Platinum jumped nearly $40 (2.66%) in response to the decline in competing investments Tuesday. This was particularly impressive considering platinum’s recent history.
As this week comes to a close, global investors are likely to be looking to keep their capital in the relative safety of precious metals over the weekend. The U.S. government released retail sales data Friday morning that reported, contrary to popular expectation, that levels had dropped 1.2% in May. This does not bode well for economic recovery expectations.