Gold And Silver Work To Hold Gains In Face Of Post-Fed Equities Rally

If there is any doubt that the United States Federal Reserve is the big dog among central banks, behold the aftermath of yesterday’s decision to hold interest rates steady until the next meeting (at least).

Gold started the day off very strongly, spot rising to 1344 in intraday trading, but lost some of that momentum, pressured a bit by equities and some profit taking over the two-day rally we are experiencing. Gold will close around the 1337 level. Silver followed a similar pattern and is fixed to end the day up about a third of a percent. The gray metal is showing unexpected resilience.

Of course, lower bond yields make the opportunity cost of holding gold less of an obstacle and rejuvenates it as a solid haven play.

Underscoring the Fed’s preeminent position was the behavior of overseas stock indexes today. Yes, indeed, the New York indexes, led by the NASDAQ, finished strongly yesterday after the FOMC statement and Chairwoman Janet Yellen’s news conference.

Today, however, the Nikkei jumped close to 2.00%; Shanghai rose 0.56% and the more-sober Hong Kong went up not quite 0.40%. Tokyo surfed on the good news from the announcements of own central bank. (See fundamentals portion of yesterday’s Gold Forecast news.)

Europe’s equities were also impressively strong today. The DAX and CAC were both up 2.25%. The FTSE lagged Germany and France but was up a solid 1.15%.

We are seeing the U.S. equities up not quite as strongly as the aforementioned indexes overseas because American stocks are either at or exceeding all-time highs and investors understandably get a little lightheaded at the higher altitudes.

Some data releases also helped stoke U.S. equities’ pricing. Weekly new unemployment claims came in under estimates (by 10K). Leading economic indicators were down but it was on what some consider to be “good news.”

New home sales fell by 0.9% when they were expected to rise by 1.3%. Why is that good news? That means more demand for building, which means more young people (who tend to buy newer homes) now have better jobs and are getting credit. It also means more jobs in the United States: someone has to build those new homes and provide materials, transport, etc. Thus, real estate and builders helped lead equities prices up today in New York.

West Texas Intermediate crude settled up over 2.15% but rapidly fell in the afternoon session and is now ahead by only 1.80%. Brent North Sea followed the same pattern but rose and fell less extremely.

The VIX volatility index is down below 12, an indication that the markets like what they see. So far.

Wishing you as always, good trading