Other pointers to precious metals performance are a little mixed at the moment. There was some (presumably) institutional disinvestment from the world’s largest gold ETF – SPDR Gold Shares (GLD) – last week and on Monday, but these didn’t do much to move the gold price. Nor did a big inflow yesterday of nearly 7 tonnes seem to have much effect either. But overall GLD has added around 18 tonnes of gold year to date.
Interestingly the gold price is up around 4.7% and silver 6.7%. This compares reasonably favourably with the heavily hyped rise in the DJIA (also up 4.7%) and S&P 500 (up 4.5% ytd). If one reads media headlines it would be hard to come to this realisation, although gold and silver are certainly, so far, more volatile.
Of course if the Fed doesn’t raise interest rates at the forthcoming FOMC meeting, precious metals could go through the roof but we now see this as unlikely. If an aggressive Fed decides to raise rate by 50 basis points (again probably unlikely as the cautious Yellen will probably want to test the water first, the gold and silver could take another nasty knock. If the consensus happens and rates are raised by 25 basis points it SHOULD have little effect on precious metals prices which have already anticipated such a rise, but on past Fed rate raising decisions, even though they may have been expected, the actuality could see a raid in the futures markets to drive the price downwards, although we would expect such a move to be quickly reversed given interest rate will effectively still remain in negative territory. But, as we have intimated above, it is the tone of Janet Yellen’s post FOMC meeting statement which could have the biggest impact. We’ll have to wait and see.
This post was published at Sharps Pixley
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