In the immediate aftermath of the Federal Open Market Committee’s meeting yesterday, precious metals were more non-reactive than anything. Having lost only marginal value, gold and silver seemed to be in an OK position heading into the last two days of the week. All of this changed, however, when markets opened on Thursday as metals had declines steeply overnight and were continuing along their downward trends through most of the morning. If the economic atmosphere around the world was uncertain prior to yesterday, the uncertainty level has risen significantly today.
Scared Marketplace
The only story market watchers and investors have been paying attention to this week was the Federal Reserve’s Open Market Committee meeting which began on Tuesday and ended in the afternoon on Wednesday. After the meeting had concluded it was clear that the FOMC would not institute any major changes to monetary policy in the US and bond buying by the Fed would remain the same in the coming weeks as it has been for a while now. This was good news for precious metals because an announcement indicating the imminent end to Quantitative Easing would have been disastrous.
Things took a turn for the worse during Ben Bernanke’s post-meeting press conference. During this address he alluded to the fact that bond-buying may be decreased in the coming months. While this contradicts what the supposed outcome of the meeting was, investors still weighted Bernanke’s words heavily. With bond-buying not a guarantee now like it was a year ago, the marketplace has become fearful and commodities such as gold and silver have been hit with some force today.
Stock Market Declines
Also in the wake of the latest FOMC meeting, major stock markets around the world experienced some deep declines on Thursday. Both Asian and European stock markets hit rough patches during the overnight and early morning hours, but so too did US stocks during the first part of the day.
Bonds from around the world are also facing some heavy downward pressure today. The only entity of the world economy that is being helped by the FOMC meeting and subsequent press conference is major paper currencies. The US Dollar has made some decent positive gains which makes sense as most commodities are taking on heavy losses.
Economic data out of China that was released on Thursday indicated that the Chinese economy may be in the midst of a period of contraction. This is not surprising as we are well aware of the dire economic situations currently facing both Asia and Europe.
Price Movement
This week, more specifically the last few days, has been horrid for precious metals all thanks to the FOMC meeting. Gold started the week at $1,390 and by about midday on Thursday had lost over $100 to be currently sitting at $1,287.
Silver started the week at a little over $22, and is now down to under $20. These losses are unprecedented to say the least.