Precious MetalsPrecious Metals
Gold traded in a tight range between $1000 and $1010 during the New York session on Monday, but fell off sharply after the Fed’s interest rate announcement, dropping below $980 before a final uptick into its finish at $981.30, down $21.40. Overnight, gold is sharply higher.
Platinum declined slowly but steadily from the New York open straight through the day, but started from a high enough overseas price to end with a slight gain at $1951, up $8. Overnight, platinum is trending higher.
Silver peaked at $20.42 just before New York opened, then also dropped through the day, though it did come off its intraday low late in the afternoon to close at $19.67, down 44 cents. Overnight, silver has been pushing higher.
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Both gold and silver were hurt badly yesterday by the Fed’s interest rate cut. Although it was a hefty one of 75 basis points, which in the long run is strongly gold-positive, the disappointment among those expecting a full 1% reduction helped fuel a flight out of the precious metals.
And into equities, as the Dow soared 400 points. All because the Fed, despite a vastly inflationary move (and further, inflationary PPI numbers), acted just a tad less aggressively than it might have. Strange investor behavior, indeed. But such are the interesting times in which we live.
Sentiment was also driven by traders coming to the conclusion that, because the Fed stopped short of a more extreme cut, it must therefore feel that economic conditions aren’t as bad as they seem to be. And, therefore, they must actually not be as bad as everyone can see.
Alice in Wonderland logic at its finest.
Gold was also hurt by a rally in the dollar predicated on the same logic that the buck won’t be slammed as much as it would have been by that extra quarter-point cut. The dollar’s strength was enough to counteract a rise in the price of crude.
Predictably, there are those reading a decline in the gold price into these particular tea leaves.
“We already have a lot of economic woes priced into the market, and that could spell a short-term bottom in the dollar,” said Tom Hartmann, of Altavest Worldwide Trading in Mission Viejo, California. “That likely would [spell] a top in gold prices for the time being.”
We shall have to wait and see if buying on the dip occurs today.