Yesterday’s Federal Open Market Committee did not do many favors for the precious metals. The hawkish commentary by the Federal Reserve included the declaration that asset purchases and quantitative easing will cease at the end of October. While this wasn’t a surprise, it was strong enough wording to rattle the markets and open the doorway for new policy moving forward. The Fed upgraded its assessment of the job market’s performance while indicating that short-term interest rates will remain near zero for a “considerable time”. The end of QE and the prospect of a shorter timeline for the first interest rate rise since the financial crisis sent gold and silver plunging lower in yesterday’s afternoon session. Gold will struggle to make new highs in an environment where it has to compete with yield-bearing financial instruments.
Data this morning showed that the US economy grew by 3.5% in the third quarter, beating the estimates of 3.0%. The USD and stocks rallied while gold and silver succumbed to further liquidation. Evidence of the US economy improving tarnishes the safe haven appeal of gold.
Gold has now traded lower in six of the last seven trading sessions. It closed below $1,200 today and looks poised to test the next major support of $1,180, a triple bottom and the low from the last four plus years. Silver collapsed nearly 5% today and had its lowest close in over four and a half years. The momentum is clearly down right now and there is really no major support until the psychological figure of $15.