December 19th Weekly Silver Market Update

Gold and silver opened Thursday sharply lower as the market continues to digest yesterday’s FOMC decision as well as Bernanke’s post-meeting statement. In fact, gold is now hovering below the $1,200 threshold and is now at a 6-month low. Today it became clear that the decision to taper QE worked out for the US Dollar and US stocks, yet not so much for precious metals.

There is some light US economic data on the table for Thursday, but it likely will not impact the market all that much.

FOMC Decides to Taper Beginning in January

Even though the market was expecting a tapering announcement to be made this week, it was up for debate how significantly the Fed would actually decide to reduce QE by. When the policy meeting finally came to a conclusion yesterday afternoon, the Fed decided to taper its monthly bond-buying by $10 billion. In the initial aftermath of the Fed’s decision there were no real clear winners or losers as gold and silver did not move much, but as markets opened on Thursday it became clear that both stocks and the US Dollar benefited from the Fed’s decision.

Officially, the Federal Reserve will reduce QE by $10 billion beginning next month. The $10 billion reduction is actually 2 $5 billion reductions put together. One half of the decision will see treasury bond purchases reduced by $5 billion while mortgage-backed securities purchases will be reduced by $5 billion.

As stock markets continue to build upon their recently strong upward trends, many market experts are becoming convinced that the bullish run by the US stock market will be coming to an end soon. With gold and silver being at their lowest point in over a half year, it is clear that most investors are staying as far away from safe-haven assets as possible.

With the Fed continuing to purchase billions of dollars worth of bonds every month and the US economic atmosphere being more suitable for risk, investors are in a pretty good spot at present. Now, only time will tell if stocks will continue to improve or if they will max-out and take steps backwards.

Posted in News

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