Gold and Silver Hold Steady as Federal Reserve Remains Divided

Wall St. Cheat Sheet

On Wednesday, gold (NYSEARCA:GLD) futures for August delivery, the most active contract, increased $1.50 to close at $1,247.40 per ounce, while silver (NYSEARCA:SLV) futures for September edged 3 cents higher to finish at $19.17.

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Both precious metals were relatively quiet before and after the Federal Reserve released its latest policy minutes. About half of the central bank’s 19 senior officials said quantitative easing should be stopped by the end of this year. However, 14 participants believe the first increase in the target federal funds rate should not come until sometime in 2015.

The minutes said: “Others were concerned that stating an intention to slow the pace of asset purchases, even if the intention were conditional on the economy developing about in line with the Committee’s expectations, might be misinterpreted as signaling an end to the addition of policy accommodation or even be seen as the initial step toward exit from the Committee’s highly accommodative policy stance. It was suggested that any statement about asset purchases make clear that decisions concerning the pace of purchases are distinct from decisions concerning the federal funds rate.”

In September, the central bank announced quantitative easing 3, which buys agency mortgage-backed securities at a pace of $40 billion per month. The program is open-ended and will continue for as long as the Federal Reserve thinks is necessary. Three months later, the central bank announced it would purchase $45 billion of long-term Treasury securities, known as quantitative easing 4. It also decided to keep interest rates at historic lows as long as the unemployment rate remains above 6.5 percent.

The unemployment rate currently stands at 7.6 percent. The U-6 unemployment rate, which includes everyone in the headline rate plus people who are either employed part-time but prefer a full-time position or want work but have stopped looking, jumped from 13.8 percent in May to 14.3 percent in June — its highest level in four months.

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Heading into the close, shares of the SPDR Gold Trust (NYSEARCA:GLD) increased 0.40 percent, while the iShares Silver Trust (NYSEARCA:SLV) declined 0.30 percent. Gold miners (NYSEARCA:GDXBarrick Gold (NYSE:ABX) and Yamana Gold (NYSE:AUY) increased 0.30 percent and 0.90 percent, respectively. First Majestic Silver (NYSE:AG) jumped more than 3 percent.

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Disclosure: Long EXK, AG, HL, PHYS

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