How the Fed Meeting Impacts Precious Metals

Cassie Bastien

6/14/2017 12:18:42 PM

Daily Gold & Silver Market Report – 06/14/2017

Many, if not all, investors are watching the Federal Open Market Committee (FOMC) meeting Wednesday, which will provide clear insight on whether the Federal Reserve will keep the interest rate stagnant or increase it and if they are planning future rate hikes. Meera Shawn with MarketRealist explains higher rates offered on Treasuries reduce the lure for non-yield bearers such as Gold and Silver. Although prices have been low, the pace at which the Fed decides to hike interest rates may slow down due to possible geopolitical concerns and below-average economic performance. If that pace slows down, it could give some buoyancy to the metals.

Gold Prices Are On the Rise

Gold prices have risen to their highest levels of the session Wednesday morning, according to Investing.com, “as lackluster U.S. data on inflation and retail sales saw investors temper expectations for more rate hikes by the Federal Reserve.” Investors now look toward a rate hike announcement by the Federal Reserve, expected following a two-day policy meeting at 2 p.m. (ET), and possibly even more information regarding the future path of interest rates. Federal Reserve Chair Janet Yellen is scheduled for “what will be a closely-watched press conference 30 minutes after the release of the Fed's statement.” Investing.com reports, “Market players will also pay close attention to details of the Fed's plan to reduce its $4.5 trillion balance sheet later this year.” After raising its benchmark interest rate already this year, the median policymaker forecast is for two additional 2017 rate increases. However, a run of disappointing U.S. economic data and growing uncertainty about the President Donald Trump-led administration's ability to pass tax and healthcare reforms has sparked doubts over the Fed's ability to raise rates as much as it would like.

Could the Price of Silver Rally to $22?

Money Morning Resource Specialist Peter Krauth says we could see Silver prices start to climb after Wednesday's FOMC meeting conclusion, if the Fed raises rates. Despite a losing streak of a little more than 4 percent last week, Krauth is “confident Silver is poised for a big rebound after the June FOMC meeting on Tuesday and Wednesday. Although higher interest rates tend to boost the [U.S.] dollar, they have actually been bullish for the [gray metal].” Krauth provided examples from previous interest rate hikes, stating “Before the Fed raised rates in March 2017, Silver prices closed at $16.95 an ounce on March 13. When rates were raised on March 15, Silver prices closed at $17.42. That's a 2.7% jump in just two days.” With the results of another rate hike coming Wednesday afternoon, Krauth's prediction of a $22 Silver price is more than possible.

At 1:18 p.m. (ET), the APMEX Precious Metals spot prices were:

• Gold, $1,276.30 Up $7.20
• Silver, $17.22 Up  $0.35
• Platinum, $951.70 Up $24.50
• Palladium, $867.50 Down $2.00

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