Gold and silver prices fell for the third straight week as traders
speculated that the Federal Reserve will end its current $85 billion per
month money printing program sooner than expected. This bolstered the
trade-weighted dollar, a move that often times leads to weaker commodity
prices, and important technical support levels were breached for both
Along with the rest of the natural resource sector, bullion was
already under heavy selling pressure before the release of the Fed minutes
due to unsubstantiated rumors of a large commodity hedge fund being forced to
liquidate its holdings and a fast-approaching “death cross” sell signal for
Note that, despite the mild hysteria associated with this technical
indicator, according to Ryan Detrick of Schaeffers
Investment Research (as detailed in this WSJ story)
the gold “death cross” is not only an unreliable indicator, but, in fact, a
contrary indicator, meaning that higher gold prices are now more likely in
the months ahead.
On Wednesday, the gold price dropped below $1,600 an ounce for the first time
since August after details of the Fed’s last policy meeting showed that some
officials favored ending its bond-buying program sooner than planned.
As was the case six weeks ago when the release of the December Fed
minutes indicated a similar sentiment (and markets also reacted negatively), this was again a very misleading take
on future central bank policy since the views of hawkish, non-voting regional
Fed presidents are given equal weight to members of the
policy committee within the minutes.
[Some excerpts from the latest issue of the Weekend Update in the
subscribers section of the website.]
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