The main piece of news on investors’ minds was the latest FOMC meeting, which took place this week from Tuesday morning until Wednesday afternoon. Though no changes were made to monetary policy in the US, the Fed’s post-meeting statement has been digested and has been deemed as a bearish factor for metals.
Also in the news this week was October’s employment report, of which was weaker than market expectations. Investors will continue to monitor the rising short-term interest rates in China, though this situation is mostly negligible so long as Chinese monetary policy does not change.
FOMC Meeting and Subsequent Speculation
Prior to early October’s government shutdown, the prevailing thought amongst investors was one which held firm to the belief that the Fed would reduce or in some way alter monetary policy before the end of this year. After the 16 day shutdown however, that sentiment changed drastically and saw most market experts in agreement regarding monetary policy, saying that it would not be until late in 2014′s first quarter or sometime in the second until we would see some sort of change to the Fed’s monthly bond-buying program, also known as Quantitative Easing.
Yesterday’s meeting was uneventful because QE was retained. With that being said, the Fed’s statement after the meeting worked to disprove the widely held current belief that tapering of QE would not even be considered until next year. Their statement indicated that while the US economy is not performing in a way which would merit the reduction of QE, it is nowhere near as weak as many people are suggesting. Compared to only a few months ago the US economy is doing better.
This simple statement led to a decline in the spot value of both gold and silver as now it is once more believed that QE has a chance to be tapered by the end of the year. This growing belief has proved to be adversarial to the spot prices of precious metals as gold is down over $20 and silver is down over $1 in the early going on Thursday.
Other US Economic Data to Digest
Apart from the FOMC meeting, investors also had plenty of US economic data to take into consideration. First up was October’s employment report, which came in weaker than market expectations. While it was expected that non-farm payrolls would increase by 150,000 in October, the actual figures indicated an increase of just 130,000; 20,000 short of what was expected. This news was bullish for precious metals, but since it was released more or less in conjunction with the FOMC meeting, it was counteracted by the Fed’s bearish statement.
According to marketwatch.com, jobless claims fell by about 10,000 this week. This, along with the rising value of the US Dollar are both preventing gold from making any gains and actually forcing losses upon both precious metals.