Gold Spot Price Open: $1,316
Gold Spot Price Close: $1,334
Change in Gold Spot Price: +$18
Silver Spot Price Open: $19.28
Silver Spot Price Close: $19.77
Change in Silver Spot Price: +$0.49
Precious metals made nice gains on the day thanks to, you guessed it, the outcomes of central bank meetings from Japan and the United States. When all was said and done, gold gained about 18 dollars while silver picked up just shy of 50 cents. Platinum and palladium also gained earlier on in the day, but by day’s end finished right around even.
BoJ Shifts Policy Goals
Though a good majority of the marketplace’s attention today was being given to the FOMC meeting, the Bank of Japan was also taking part in their monthly policy meeting. While it may not have seemed that way, the BoJ’s meeting is, in many ways, just as important due to policy changes that were thought to be coming today.
Policy changes are exactly what we got as Japan’s central bank announced that it would be shifting the course of its attempts to boost the economy and promote growth. Instead of pursuing the money printing that has been going on for about 3 years now, the BoJ is instead targeting interest rates in an attempt to put the Japanese economy back on track. While this did give gold and silver a boost straight from the time markets opened, investors were mostly holding positions ahead of the even more important FOMC meeting and accompanying post-meeting statement. Tom Kendall of ICBC Standard Bank put it best when he said, “[the BoJ decision] provided a bit of a lift to gold as well as well as other assets, but certainly we are going to be more or less on hold until we see the Fed statement later.”
Fed Leaves Rates Unchanged
As was widely expected, the FOMC decided to leave interest rates unchanged at the conclusion of their meeting this week. Among many factors, the lack of inflation continues to weigh on the Fed’s decision to keep rates between .25% and .50%. There were a few voting members who disagreed with the lack of action, but a strong majority of the Fed is in agreement that it is not quite time for rates to be moved by any margin.
As is typical, the Fed commented that while the US economy may not, holistically, be strong enough to warrant a rate hike, the post-meeting statement did make mention of the fact that economic activity is, and has been, picking up. Perhaps the biggest takeaway from the post-meeting statement was when the Fed said “…that the case for an increase in the federal funds rate has strengthened but [the Federal Reserve] decided, for the time being, to wait for further evidence of continued progress toward its objectives.” To many, this was a nice way for the Fed to say that inflation is still well below its 2% target. Like we have been saying all along, inflation is perhaps the biggest factor influencing the rate hike decision.
The FOMC statement in conjunction with the BoJ’s decision ended up giving precious metals a nice boost to end the day. Even though there is still a possibility that rates will be hiked before the end of the year, metals are gaining more traction. If it weren’t for a US equity market that performed exceptionally on the day, gains by gold and silver spot values might have been even larger.
Wrap-Up
Even though barely anyone was expecting to hear a rate hike announcement today, the market still had a noticeable reaction to the Fed’s lack of motivation to raise interest rates. Now, it will be interesting to see how the rest of the week pans out. Tomorrow will see the release of the weekly jobless claims, but beyond that it will be intriguing to see if gains today will turn into a pullback tomorrow.
