Gold and silver have had a turbulent and less than positive week as the Federal Reserve of the United States finally made the announcement that they will taper their monthly bond-buying monetary policy, also known as Quantitative Easing. The reduction to QE announced by the Fed was only about half of what the market was expecting to hear, though it put heavy selling pressure on gold nonetheless.
Both gold and silver were able to consolidate and make small gains in the early parts of Friday, though they are still at lows the market has not witnessed in quite some time.
FOMC Policy Meeting and Outcome
Prior to this week investors from all over the world had been speculating with regard to when the Fed would reduce QE and by how much they would reduce it by. Despite the fact that most of the market was expecting a tapering announcement to be made this week, there were still some doubters. Nonetheless, when Wednesday afternoon rolled around and Fed chairman Ben Bernanke made his post-meeting statement it became clear that the Fed finally made the tapering move that the marketplace has been expecting since summer.
Though the market was expecting to see government bond purchases decline by $20 billion, Bernanke announced that bond purchases would only be cut back by half that amount. Officially, the Fed will reduce its mortgage-backed securities purchases by $5 billion while also reducing their treasury bond purchases by the same tally. Tapering will begin next month, though its affects have been and still are being felt by the market.
In the initial aftermath of Bernanke’s statement, gold and silver spot values did not decline, but rather made minor gains. While some investors were beginning to think that gold and silver might have survived the worst of the Fed’s announcement, Thursday painted a different picture. As soon as markets opened up on Thursday it became clear that the real winners were the USD and US stocks while the biggest losers were gold and silver. Almost instantaneously on Thursday, gold opened up and dropped to a 6-month low, falling underneath the $1,200 threshold for the first time in a long time. As the bullish stock market run continues in the United States, gold and silver are still having a tough time gaining much of anything. Friday has seen spot values regain some foothold, but they are still far below what anyone would consider “normal.”