It’s safe to say that this was one of the worst 5-day trading sessions precious metals have experienced in the last few months. After spending the first half of the week moving mostly sideways, the spot values of gold and silver have done nothing else besides drop off significantly during the last 2.5 days of this week. The big news during this week’s trading session came Wednesday afternoon in the form of the most recent Federal Open Market Committee meeting in the United States. As has been the case in recent months, investors were paying attention to the FOMC meeting in hopes of deriving more information about when exactly the Fed is planning on hiking interest rates.
In addition to the FOMC meeting, investors from the US and around the world had plenty of US economic data to mull over and discuss. Unfortunately for gold and silver, however, almost all of the talking points released from the middle of Wednesday afternoon onward have done little else apart from add to the pressure being experienced by gold and silver. Now, with spot gold down more than $50 and silver’s spot value down by more than a whole dollar, it will be interesting to see if they will be able to bounce back anytime soon, or if these new lows are the range where metals will trade in for the foreseeable future.
While it is true that every FOMC meeting is important, investors are really only paying attention in order to hear what is said in the post-meeting statement. As expected, the Fed announced that it would finally be doing away completely with quantitative easing, the easy money policy that is said to have played a major role in the economic recovery we are now witnessing. While this wasn’t much of a surprise, the fact that the Fed had only positive things to say about the US economy did.
While it was reiterated that there will still be “considerable time” until interest rates in the US are raised, most investors interpreted the Fed’s more hawkish tone as meaning that interest rates might actually be raised sooner than anticipated. Unfortunately for gold and silver, the Fed’s statement did little else apart from stack on the pressure being experienced, and thus, spot values declined.
As if Wednesday’s FOMC post-meeting statement wasn’t enough, Thursday opened up with some US economic data that only added to the selling pressure being felt by metals. According to one report, US 3rd-quarter GDP expanded far better than expected and capped off a 6-month run that was the best the US economy has seen in over a decade.
In addition to this, another report indicated that the number of people filing for unemployment in October was the lowest we have seen at any point during the last 14 years. As you probably could have guessed, all of this data gave the US Dollar and US equity markets a boost all while simultaneously dooming gold and silver to a week of marked losses. As we look ahead to next week, the first week of November, it will be interesting to see if metals can bounce back or if things will continue to be rough on them.