US Economy Struggles As QE2 Is Set To Expire

By Michael Montgomery—Exclusive to Silver Investing News

The weak US dollar that lent support to silver prices yesterday was a nonfactor in today's trading. Spot silver prices on the day were weak, ending the day down $1.65 to $36.82 per ounce. Economic concerns continue to weigh heavy on the minds of investors. These concerns center on the debt crisis in Europe and the US. Most analysts agree that the economic recovery is cooling off. Ahead of US economic data set to be released on June 3rd, all signs indicate that the data will be weak. Jobless claims, the hallmark of the economic recovery, increased by 10,000 to 424,000 in the week ended May 21, according to US Labor Department figures. As QE2 is set to expire at the end of the month the change in monetary policy and the effect on the US dollar, is at the forefront of investors' minds.

In an exclusive interview with Silver Investing News, Josh Feinman, Global Chief Economist for DB Advisors sheds light on the upcoming economic data.

“On the whole, the data shows a notable loss of momentum. Some of the factors are temporary, such as weather issues, supply disruptions from Japan, and auto plant shutdowns. I do not think that all of it can be ascribed to these factors. The data reflects an economic recovery that is having trouble shifting into a higher gear,” stated Feinman. He added, “I don't suggest that the economy is faltering, or about to rollover; it is having trouble sustaining the gains made last year.”

The weak economic recovery and loose monetary policy had been supporting the price of silver and gold as fears of inflation and a weak US dollar drove investors to safe haven assets. The recent corrections in the silver market have been largely attributed to margin requirements by the CME group. The lack of a robust recovery may bode well for silver. Many factors weighing down the economy may be transitory as Feinman stated, however, lingering problems from the recession are not going way.

“We are dealing with headwinds that have held the recovery back from the start. These are factors associated with the crisis; such as housing overhang, lingering credit restrain, hesitancy with household spending seeking to repair their balance sheets, and higher oil prices,” remarked Feinman.