Precious Metals Market Report by Bill Musgrave – American Gold Exchange
Gold swung between gains and losses today as traders digested news about the Fed’s stance on interest rates. After edging up 0.2% to close near $1,192, the metal briefly surged above $1,200 in electronic trade in response to dovish language in the new policy statement before retreating under pressure from a rising dollar.
The FOMC dropped its pledge to hold interest rates near zero for a “considerable time,” saying instead that it “can be patient in beginning” the process of raising rates. While the new policy statement was generally upbeat about the economy, citing “solid” improvements in the labor market, it telegraphed some concern about falling inflation by adding language that the committee will “monitor inflation developments closely.” Underscoring this concern, today’s CPI release showed that consumer inflation fell in November by the most in six years.
The Fed also lowered its forecast for the federal funds rate by the end of 2015. Whereas in September the estimate was 1.375%, the new forecast is 1.125%, indicating that rates are likely to rise by less than expected next year.
Traders found the new Fed stance more dovish than anticipated, given recent momentum in the U.S. economy, which helped buoy the gold price. But momentum swung in the other direction as U.S. equities and the dollar surged on the Fed’s optimism about the economy, reducing demand for the metal as a safe haven. The ICE Dollar Index surged 1.2% while the Dow finished nearly 300 points higher and the S&P 500 added 2%.
The other precious metals were mixed. Silver jumped 1.1% before surrendering most of those gains after hours. Platinum closed up 0.3%, then slid to a 0.4% loss after hours. Palladium dropped 0.6% at the close and edged down a bit more after the Fed statement.
At the Comex close: February gold edged up 20 cents to $1,194.50; March silver jumped 18 cents to $15.93; January platinum added $3, to $1,199.50; and March palladium dropped $4.75 to $779.25 an ounce.