Precious Metals Struggle, But Fed President Says “Do Whatever It Takes”
On Thursday, gold (NYSEARCA:GLD) futures for December — the most active contract — fell $12.10 to close at $1,324.10 per ounce, while silver (NYSEARCA:SLV) futures declined 12 cents to finish at $21.77.
Both precious metals received selling pressure as the U.S. Department of Commerce’s third estimate of second-quarter gross domestic product leaves the picture of United States economic growth from April to June unchanged at an annual rate of 2.5 percent. Furthermore, the department said inflation remains muted.
After rising at a 2.3 percent rate in the first quarter, spending slowed to a 1.8 percent growth pace in the last quarter. Incomes have failed to rebound since the end of the recession, and stagnating incomes mean Americans are more likely to keep discretionary spending to their immediate needs, posing a clear problem for economic growth. Consumer spending accounts for approximately 70 percent of the economy.
Due to the sluggish economy, Federal Reserve Bank of Minneapolis President Narayana Kocherlakota believes the central bank should be more aggressive with stimulus measures and do “whatever it takes.”
“Doing whatever it takes in the next few years will mean something different,” he said. “It will mean that the FOMC is willing to continue to use the unconventional monetary policy tools that it has employed in the past few years. Indeed, it will mean that the FOMC is willing to use any of its congressionally authorized tools to achieve the goal of higher employment, no matter how unconventional those tools might be. Moreover, doing whatever it takes will mean keeping a historically unusual amount of monetary stimulus in place — and possibly providing more stimulus.”
By the end of the trading day, shares of the SPDR Gold Trust (NYSEARCA:GLD) fell 0.80 percent, while the iShares Silver Trust (NYSEARCA:SLV) declined 0.30 percent. Gold miners (NYSEARCA:GDX) Barrick Gold (NYSE:ABX) and Yamana Gold (NYSE:AUY) dropped 0.80 percent and 2.5 percent, respectively.
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Disclosure: Long EXK, AG, HL, PHYS