Gold and silver have been taking heavy hits all day, even after they were fairly non-reactive in the wake of the most recent Federal Open Market Committee meeting. It is not just precious metals taking major losses during the day on Thursday as most major stock markets are feeling the monetary policy blues as well. Though this week was not necessarily expected to be a good one for precious metals, it has quickly turned into a nightmarish one for investors of all types. Even though no major decisions were made at the FOMC meeting, there was enough there for investors to feel that gold and silver will not be seen as safe-haven assets.
In the Wake of the FOMC Meeting
During this week alone we have seen gold lose over $100. As of only about a day ago, weekly losses were barely approaching $20, so people are naturally left shell-shocked wondering what on earth is going on. The confusion is heightened because the attention-grabbing Federal Open Market Committee meeting actually resulted in no changes to monetary policy or the current bond-buying that the US Federal Reserve is employing. Because no major changes were announced, precious metals did little moving on Wednesday, though when markets opened up on Thursday it was a different story entirely.
The reason we have seen such heavy declines in the value of gold and silver lies, not in the lack of decisions made by the FOMC, but in the comments made by Ben Bernanke after the meeting. During his press conference, Bernanke stated that while monetary policy will remain unchanged for the time being, there is a strong possibility that the Fed will tone down its monthly bond buying significantly sometime in the near future. Many investors feel as though by this time next year monthly bond buying by the US Federal Reserve will be more or less non-existent.
Because many investors feel as though the monetary policy that is working to devalue the US Dollar will be done away with soon, they are moving away from safe-haven assets like gold and silver. A devalued dollar is always good for precious metals, so naturally if that is taken away gold and silver will be threatened. With the value of gold and silver falling rapidly, bargain hunters will be out buying precious metals in full force.
Stock Markets Decline
Precious metals are not the only entities experiencing deep declines today as world stock markets are suffering as well. Asian, European, and American stocks have all experienced deep declines today as investors are more interested in world paper currencies than they are stocks or commodities at the moment.
Some economic data out of China indicates that their economy is currently in the midst of a contraction, though this is evident by most of China’s recent economic activity.
Closing Out the Week
As we round out the last day of the week or so, precious metals investors are hoping that gold and silver can at least make a partial bounce back. Though this is not likely, it will not keep investors from holding out hope.