Closing Gold & Silver Market Report – 9/21/2011
BERNANKE RESPONDS TO MARKET’S JITTERBUGS; DOES THE TWIST
The much-anticipated, much-speculated announcement from the Federal Open Market Committee came this afternoon and confirmed what most analysts were predicting: A strategy known as “Operation Twist.” Precious metals and stock markets are down following the announcement.
The Fed’s plan is to flatten the yield curve of U.S. Treasuries by selling short term bonds to buy long term bonds. This would push down the interest rate the government pays on 10-year T-Bills. Many other long-term loan interest rates (such as mortgage and business loans) are based on the rate of the 10-year Treasury bond. The net effect would be a reduction in borrowing cost for homeowners and businesses, which, if everything goes according to plan, would result in job creation.
As evidenced by the drop in the markets this afternoon, not everyone believes the Fed’s plan will be effective. Kevin Ferry, President of Cronus Futures Management said, “Is there going to be less debt in the system or more? There’s going to be more. The Treasury’s obligations are going to come due.” In addition, the Fed said in its own report that there are “significant downside risks,” indicating that the Fed fears that the possibility of another recession is increasing.
At 4:00 PM (CT) the APMEX precious metals spot prices were:
- Gold - $1,783.10 – Down $24.50.
- Silver - $39.80 – Down $0.36.
- Platinum - $1,766.30 – Down $18.60.
- Palladium - $693.30 – Down $25.50.