Gold and silver are down sharply on Thursday a day after the FOMC decided to taper is monthly bond-buying monetary policy, also known as Quantitative Easing. Though the market was expecting a tapering announcement to be made, most anticipated that the reduction in monthly bond purchases would be larger than $10 billion. Nonetheless, US stocks as well as the US Dollar rallied on the tapering news, something that put pretty heavy downward pressure on gold and silver.
Now, gold is sitting at a 6-month low after falling below the $1,200 threshold.
FOMC Decision, Statement Ultimately Bearish for Metals
After the FOMC meeting came to an end on Wednesday afternoon, Ben Bernanke addressed the public. What Bernanke had to say was not overly negative or positive for gold and silver, but shortly after his speech it became clear that the Fed’s decision and statement were not at all going to work in gold and silver’s favor.
The official decision made by the Fed this week was to cut monthly bond purchases by about $10 billion, beginning in January. The ten billion dollar reduction is actually double-sided in that the Fed is planning on reducing treasury bond purchases by $5 billion and mortgage-backed security purchases by $5 billion as well. Bernanke’s post-meeting statement also made it seem like he and the rest of the Fed plan on pursuing similar $10 billion reductions throughout the course of 2014 to possibly completely do away with the monetary policy by this time next year. Though this is how the market interpreted Bernanke’s statements, there is no saying what course of action the Fed will pursue during this upcoming year.
While gold and silver did not post any significant losses in the immediate aftermath of the FOMC meeting, Thursday was a different story. As soon as markets opened on Thursday it became clear that the US Dollar and US stocks were winners as a result of the FOMC meeting, while gold and silver were undeniable losers.
Now, with even more investors putting their investing funds into stocks, market experts like Jim Wyckoff at kitco.com are under the impression that the stock market run is nearing its end. With gold and silver declining to historic lows, Wyckoff’s intuition may just be spot on.
Later today the weekly jobless claims report is due out and it will be interesting to see if jobs data in the US will continue to improve or take a step backwards.