Gold Closes Solidly Higher Following Rate Hike

Gold futures finished near the highs of the day, and as of 4:00 PM Eastern standard time is trading up $4.50 at $1,303.90. Gold had been trading fractionally higher at just before the conclusion of this month’s FOMC meeting. However immediately following the meeting, the largely anticipated 25 basis point rate hike fell under pressure and gold briefly traded below $1,300 per ounce.

This lower pricing was short-lived as gold found solid footing and began to trade above 1,300 and closed near the high today of $1,305.20. Although today’s rate hike was widely anticipated, and for the most part factored into current market sentiment, it was a slightly more hawkish tone which sent the financial markets lower with the Dow Jones Industrial Average losing approximately half a percent and closing at 25,201.

The elevated hawkish tone was in reference to the number of rate hikes that the Federal Reserve anticipates initiating this year. The change from the previous dot plot was an additional rate hike this year, resulting in a total of four hikes rather than three.

One of the fundamental differences to today’s FOMC conclusion was that following the release of a statement, Chairman Powell held a press conference. It was during the press conference in which we saw gold begin to trade near the highs of the day, mostly in response to a lower dollar.

The dollar index lost approximately one-quarter of a percent, trading to 93.58. Spot gold gained $3.60 in trading today and is currently fixed at $1298.80. According to the Kitco Gold Index, $3.40 of today’s gains were a direct result of a weakening U.S. dollar, with the remaining $0.20 increase attributable to buyers bidding gold prices higher.

Silver Shines Brightly

One interesting facet over the last week of trading has been a respectable surge in silver pricing. Beginning on June 5, when silver traded to a low of $16.37, we have seen dynamic gains for five of the last seven trading days. Today silver effectively closed above a former resistance point of $16.95, finishing solidly above $17 per ounce and closing at $17.08.

This is the second occurrence of silver breaking above the narrow and tightly defined trading range that has been the overall characteristic in silver pricing since February of this year. The last occasion in which silver broke above this resistance level occurred at the end of April and was short-lived. It will be interesting to see if silver maintains its current momentum, signaling an end to the sideways trading pattern that has been so evident in pricing.

Wishing you as always, good trading,