Gold and silver finished the last week of October in unimpressive fashion as a bearish statement by the Fed has prompted an upswing by the US Dollar. The main news story this week was the FOMC meeting which took place between Tuesday and Wednesday.
In other news, US economic reports as well as European inflation data jockeyed for investor attention amongst all the FOMC speculation.
FOMC Meeting Shocks Marketplace
Beginning on Tuesday, this month’s FOMC meeting was not expected to yield any surprising outcomes, though that is exactly what happened. The FOMC decided, almost unanimously, that Quantitative Easing would be retained for the time being. Quantitative Easing, or QE, is the Fed’s buying of over $80 billion in assets each month. This monetary policy has been in place for a few years, though recently it is becoming more likely that it may be wound down, or tapered.
While the retention of QE was none too surprising, the Fed’s post-meeting statement is what really sent shock waves across the marketplace. Their statement said, in so many words, that while the US economy is not strong enough to merit a reduction or alteration to QE, it is still much stronger than it has been in past months. This statement prompted many to believe that the Fed is growing in confidence in the US economy, and that maybe QE will be wound down sooner rather than later after all.
Before the government shutdown, most investors and market experts agreed that QE’s days were limited. However, with the shutdown having done a number on the world’s outlook in regards to the US economy, and also potentially hurting 4th quarter GDP growth, the belief that QE would be altered before the year’s end faded quickly. Now we’re seeing a different story, because the Fed’s renewed confidence in the economy has prompted the US Dollar to make massive gains this week while gold and silver suffered significant losses. The growing belief after this Fed statement is that there is still a high likelihood that QE will be tapered by the year’s end. At this point there is no concrete evidence to back up the claim that QE is going to be reduced before 2014, it is all merely speculation.
US Economic Data
Even though the FOMC meeting was taking up most of the attention this week, there was plenty of economic data for investors to mull over. First up was October’s employment report, which saw non-farm payrolls increase, but by 20,000 less than what the market had expected. Prior to the data being published, market expectations were that non-farm payrolls would have risen by about 150,000 in October. In reality however, payrolls only increased by 130,000.
This week’s jobless claims were down 10,000 which was more or less in line with market expectations. While these and other pieces of economic data were important to investors this week, they did not do much in the way of pushing spot values of gold or silver in one direction or another.
All in all, gold has lost about $40 on the week, while silver’s losses have compiled to well over a dollar.