Gold Investors Welcome More Federal Reserve Support

Wall St. Cheat Sheet

On Thursday, gold (NYSEARCA:GLD) futures for December — the most active contract — surged $61.70 to close at $1,369.30 per ounce, while silver (NYSEARCA:SLV) futures jumped $1.73 to finish at $23.29.

It was the best single-day performance for gold since early 2009. However, since futures on the Comex close at 1:30 p.m. Eastern, the move primarily represents the trading action seen after the Federal’s Reserve’s 2 p.m. Eastern non-taper announcement Wednesday.

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Monthly bond purchases, known as quantitative easing, will continue as normal, with $40 billion in agency mortgage-backed securities and $45 billion in long-term Treasuries. Most economists and analysts expected a monthly bond taper of about $10 billion to $20 billion. Fourteen of 17 Fed officials don’t expect to see the central bank start to raise interest rates until 2015 or 2016.

Many analysts still expect some form of tightening to occur sooner rather than later. David Song, a currency analyst at DailyFX, explains: “Despite the delay in tapering the asset-purchase program, the more hawkish composition of the 2014 FOMC may spur a material shift in the policy outlook as the majority continues to see the first rate hike in 2015, and the bearish momentum surrounding the dollar appears to be coming an end as the Fed largely retains its timeline to scale back on quantitative easing. In turn, the post-FOMC reaction looks constructive for the USD, and looks poised to track higher over the near to medium-term as the Fed moves away from its easing cycle.”

By the end of trading Thursday, shares of the SPDR Gold Trust (NYSEARCA:GLD) and iShares Silver Trust (NYSEARCA:SLV) closed slightly in the red. Gold miners (NYSEARCA:GDX) Barrick Gold (NYSE:ABX) and Yamana Gold (NYSE:AUY) fell 3.3 percent and 2.4 percent, respectively. Shares of First Majestic Silver (NYSE:AG) declined 1.6 percent.

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Disclosure: Long EXK, AG, HL, PHYS

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