January 30th Silver Market Update

This week has thus far been full of ups and downs for precious metals. After hitting a 9-month high on Monday gold quickly fell in value and was trading down below the $1,260 mark yet again. The yellow metal held its position for the next day or so as investors were anxiously awaiting the conclusion of the FOMC’s policy meeting which was set to wrap up yesterday afternoon. Before the meeting ever convened, the majority of the marketplace was expecting to hear of another $10 billion reduction to QE, mimicking the move made by the Committee last December. Finally, the FOMC addressed the public and made it clear that they plan on reducing QE yet again this month, bringing monthly bond buying to $65 billion per month as opposed to the $85 billion we were used to up until this past December.

Gold Gains, Falls Again

In the immediate lead-up and aftermath of yesterday’s meeting, stock markets in the US and around the world were losing value at a fairly steady rate. This occurrence gave gold and silver enough room to make decent gains through the first half of the day. When the announcement was made that QE would be further reduced the decline posted by stocks intensified while gold and silver spot values continued to climb. In addition to reducing Quantitative Easing for a second time, the FOMC also made it clear that they plan on retaining low interest rates for the foreseeable future in the United States.

Today, however, as investors have had more time to mull over and digest yesterday’s FOMC decision, the spot values of gold and silver have declined once more; gold below the $1,260 and silver below $20. In fact, as it stands currently, silver is on the verge of falling below $19.

Adding to gold and silver’s woes today is the final January manufacturing PMI for China, which came back weaker than what was recorded in December. As opposed to December’s reading of 50.5, January’s PMI for China came back at a dismal 49.5, dropping a whole point. If you have any sort of familiarity with PMI readings, you are probably aware that any reading below 50 is indicative of an economy that is either contracting or on the verge of doing so.

As we bring this week to a close it will be interesting to see if gold and silver continue to decline in the wake of a stronger US Dollar and weaker Chinese economic data, or if they will be able to use recent stock declines to propel themselves upward and onward.

Posted in News

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