Barron's: Gold, Silver Drop In Regular Trading But Bounce After FOMC Minutes

Source: Barron's

Author: Teresa Ribas 

Gold bounced around on Wednesday, with June prices closing down $3.20, or 0.2%, to $1,305.90 an ounce, but rising again after the release of the minutes from the Federal Reserve’s March meeting, which helped stocks extend earlier gains. Gold for April delivery lost $3.20 per ounce, or 0.24% to $1305.50, the eighth down day in the past eleven sessions.

Silver followed the same pattern, as it also slipped today in regular trading, but got a bump after the release of the Fed minutes. Both metals backed off the two-week highs they recorded on Tuesday. 

Scott Carter, Chief Executive at Lear Capital, noted that the FOMC minutes highlighted the Fed’s dovish stance in an email to Barrons.com:

The message was clear that interest rates must stay low for a long time and the economy is still quite weak without the Fed’s extraordinary liquidity support.  Gold prices jumped after the minutes were released due to the Fed’s comments on the economy and interest rates.

Most likely, the economy will struggle to grow above 2% throughout the year and weak employment numbers are here to stay.  This will ultimately force the Fed’s hand, requiring additional support measures.  I expect the fed to suspend tapering sometime mid-year and could possibly lead to additional stimulus through quantitative easing later in the year.  Gold will respond well to these developments due to the dollar declining in value and fear entering the equity markets once again.

In recent trading the SPDR Gold Trust (GLD), the Market Vectors Gold Miners ETF (GDX) and the Direxion Daily Gold Miners Bull 3X Shares (NUGT) were rising; the Direxion Daily Gold Miners Bear 3X Shares (DUST) andt the iShares Silver Trust (SLV) were losing ground.