October 31st Weekly Silver Market Update

Through the first half of the week gold and silver did little moving. However as markets opened up on Thursday both gold and silver were victims of some hefty losses. These losses are due, in large part, to the Federal Reserve’s statement after the FOMC meeting which concluded yesterday.

Also in the news this week was a heavy slate of economic data as well as the rising short-term interest rates in China. Those short-term interest rates are important for investors to pay attention to, though they won’t really be a major factor unless the Chinese government decides to tighten monetary policy, a move which would undoubtedly hurt gold and silver.

The FOMC Meeting and What It Means for Precious Metals

The US Federal Reserve’s policy-making body, the Federal Open Market Committee, was scheduled to meet earlier this week. In their meeting, which took place between Tuesday morning and Wednesday afternoon, the FOMC decided it would retain current monetary policies. The current policy in place is known as Quantitative Easing and works by allowing the Fed to purchase billions of dollars worth of assets every month in order to add cash to the economy. This policy has helped keep the US economy afloat in time that otherwise would have proven perilous.

While the retention of QE was an expected outcome of the FOMC’s meeting, what the Fed had to say in their post-meeting statement was greeted with relative shock. The Fed stated that while the US economy is not strong enough to alter monetary policy, it is still stronger than people are giving it credit for. If you compare the current state of today’s economy to what it was only 6 months ago, you will notice that things have improved quite a bit.

This statement was seen as a bearish factor for precious metals because it was in direct opposition to what most thought about the strength of the US economy. After the shutdown, most people didn’t expect to see QE tapered until the middle of this upcoming year, though because this Fed statement many are thinking that QE may be tapered before the year’s end. Of course we have no way of knowing exactly when QE will be tapered, which is why next FOMC meeting will be of utmost importance.

In other news this week, October’s employment report came back weaker than expected. Compared to market expectations of a 150,000 non-farm payroll increase, actual figures indicated that non-farm payroll only rose by 130,000. This week’s jobless claims showed a decrease of about 10,000; a figure that helped push the US Dollar forward in the early parts of Thursday.

Posted in News

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