Fed No Help To Gold

Published on Wednesday, 20 June 2012 18:52 Written by Todd Shriber

The conclusion of the Federal Open Market Committee Meeting today brought about a good news/no news scenario. The good news is that Operation Twist, the Federal Reserve program aimed at boosting bank lending and consumer spending, will be extended through the end of the year. On the no news front, there was no news regarding more quantitative easing, though the central bank reiterated its view that short-term interest rates will remain near historic lows through late 2014.

No QE3 was a predictable disappointment to gold bugs and that disappointment showed in the yellow metal’s performance today. COMEX gold for August delivery slid $7.40, or 0.5%, to settle at $1,615.80 a troy ounce. Lack of enthusiasm for the Fed news even sent gold below mental support at $1,600 an ounce, but buyers quickly stepped in to send gold back above that key level.

Overall, it’s worth noting bullish catalysts still exist for gold. With interest rates set to remain low for at least another two years, the dollar’s gains could easily be limited and that should help dollar-denominated gold. Second, Europe’s sovereign debt crisis shows no signs of abating in the near-term, indicating that if gold can truly restore its safe haven status, it could start a new leg higher.

The iShares Gold Trust (NYSE: IAU) lost 0.8% while the SPDR Gold Shares (NSYE: GLD) slid by three-quarters of a percent, but there was some decent action in silver. COMEX Silver for July delivery added 2.1 cents, or 0.1%, to close at $28.389 a troy ounce. Silver futures had outpaced gold both on the way down and the subsequent recovery, with silver briefly trading in positive territory in the wake of the Fed statement, according to the Wall Street Journal.

Unfortunately, the gain in silver futures did not carry over to the iShares Silver Trust (NYSE: SLV), which slid 1.4% on volume that was well above the daily average. The other white metals were nothing to write home about either as the ETFS Physical Platinum Shares (NYSE: PPLT) dropped 1.7% on volume that was roughly 20% above the daily average. On light turnover, the ETFS Physical Palladium Shares (NYSE: PALL) lost 1.5%.

On a small down day for stocks, the mining ETFs were mixed. The Global X Silver Miners ETF (NYSE: SIL) barely closed above resistance at $20 with a close of $20.03. On volume that was about a third above usual, the Market Vectors Gold Miners ETF (NYSE: GDX) dropped 0.9% while the Market Vectors Junior Gold Miners ETF (NYSE: GDXJ) lost 1.2%.