A standard pattern for the past several years has been for the prices of precious metals to be suppressed in the 24-48 hours before the Federal Open Market Committee makes their announcements at the end of their meetings held every six weeks. The US government, through its primary trading partners and allied central banks, tried again this week.
This week, the FOMC held their two-day meetings on Tuesday and Wednesday and released their announcement at 2 PM Eastern Wednesday afternoon. The announcement left the federal funds interest rate unchanged, as was expected. However, the text included more than usual language stating that the Fed would consider more financial data than it has up to now in making interest rate decisions in future meetings. That can be interpreted as the US government saying that the economy is good now, but it is so weak that it wants to be able to cut the federal funds interest rate because the economy is declining.
Upon the release of Wednesday’s announcement, gold and silver prices took off. As I type this late Wednesday afternoon, the after-hours trading for gold is at $1,359.50 and silver is as $15.12. Gold prices are now up 6.8% since May 21, while silver has jumped 5.2%. This rise has occurred despite major short selling of paper gold and silver contracts on the commodity futures markets.
The price of gold has not closed at $1,360.00 or higher for three years. It has been more than four years since the US COMEX close exceeded $1,368.00. There is a major shortage of physical gold in the London and New York markets right now. Because of this, I think there is a strong prospect we could be near an upward breakout in precious metals prices.
In the meantime, the FOMC will not make another federal funds interest rate announcement until July 30, which will almost certainly be one of the most closely watched releases in recent months.
Patrick A. Heller was the American Numismatic Association 2018 Glenn Smedley Memorial Service Award, 2017 Exemplary Service Award 2012 Harry Forman Dealer of the Year Award, and 2008 Presidential Award winner. He was also honored by the Numismatic Literary Guild in 2017 and 2016 for the Best Dealer-Published Magazine/Newspaper and for Best Radio Report. He is the communications officer of Liberty Coin Service in Lansing, Michigan and writes Liberty’s Outlook, a monthly newsletter on rare coins and precious metals subjects. Past newsletter issues can be viewed at http://www.libertycoinservice.com. Some of his radio commentaries titled “Things You ‘Know’ That Just Aren’t So, And Important News You Need To Know” can be heard at 8:45 AM Wednesday and Friday mornings on 1320-AM WILS in Lansing (which streams live and becomes part of the audio and text archives posted at http://www.1320wils.com).