Yesterday’s Federal Open Market Committee release had, yet again, confusing dichotomous language which left market participants unclear on the intended monetary path going forward. On one hand, the Fed finally removed from the statement a promise that they would be “patient” and said they would consider raising the benchmark rate as early as June. If this were the only message, it would have been decidedly bearish for the precious metals. Of course there was more commentary to further muddle the picture though. The Fed downgraded their quarterly forecasts for economic output and pushed back their expectations about the pace and timing of interest rates increases beyond this year. Rates are now expected to reach only 2% by the end of 2016 and ~3.15% in 2017.
The markets ultimately interpreted the Fed meeting as dovish. The USD gave up substantial gains against a basket of currencies and the euro shot up over 4%, a huge intraday currency move. Gold had been trading on thin volume in a tight range pre-FOMC and then catapulted higher during and after it. Gold finished the electronic trading session up about $20 (1.75%). While it did have an impressive move, it remains range bound. Offers have materialized in the $1,175 area and this now represents a double top from yesterday and today. Until this level is decisively broken, it seems like rallies are being faded and sold into by speculative traders. Silver has managed to have more of a break out than gold, at least from a technical perspective. It tested the $16 handle yesterday and has sustained the move above it with a close above this level today. Near term resistance is at the 100 day moving average of $16.45.