Federal Reserve to Implement QE3 Measures, Boosts Precious Metals
The Federal Reserve’s announcement to institute a third round of quantitative easing fuels an already bullish outlook for the precious metals market. For the second week in a row, most notable assets and equities trended in the green with the spot price for gold and silver reaching 6-month highs this week.
Gold spot reaches 6-month high
More good news on the quantitative easing front, as announced by the Federal Reserve later in the week, fueled the surge of most precious metal spot prices for this week. On Thursday, gold broke the $1,750 barrier for the first time since February of this year as the Federal Reserve extended its promise hold interest rates near zero up to 2015 and a firm announcement on implementing a third-round of quantitative easing measures (QE3) to buoy economic indicators. For weeks now, investors and analysts have speculated on the Fed’s position to intervene and improve the economy’s robustness in the light of disappointing jobs and housing data released earlier in the quarter.
The announcement made early last Thursday sent ripples across major “money substitute” assets starting with gold which earned a 2.35 percent in-week growth to close at $1,777.10 this week. Silver, platinum and palladium also made significant advances gaining 3.55 percent, 7.23 percent, and 5.95 percent respectively. All three metals have exceeded their 6-month high spot prices and are poised to continue the streak given the encouraging news from the Federal Reserve.
As of the market’s closing on Friday, September 14, silver traded at $34.66 per ounce, while palladium and platinum were trending at $695 per ounce and $1,705 per ounce respectively.
Precious Metal ETFs continue strong gains
GDX led the way for precious metal ETFs climbing another 8.85 percent to close at $53.86, very near the $54-barrier, the first time it has approached that level since mid-March this year. For the month, GDX has advanced by 18.79 percent leading the way in renewing investor confidence in the precious metals ETFs sector. Other bullish gold ETFs include IAU which posted a 2.68 percent in-week gain to close at $17.25 and GLD which rallied by 2.70 percent to close at $171.80 for the first time since late February this year.
Rounding up a solid week of gains for precious metal ETFs are AGQ (8.02 percent), SLV (4.06 percent), PPLT (7.30 percent) and PALL (4.47 percent), all of which are looking strong to continue the push in the next few weeks as the tangible effects of the QE3 measures trickle into the money markets.
Bullish outlook for the precious metals futures market
Gold, silver, platinum and palladium are all seen to continue their strong push in towards the end of the year and commanding a strong buy on the precious metals futures market well into next year. The summary below shows bullish outlooks for COMEX contracts late this year and early next year supporting the projections of continued gains.
Equities rise in the wake of strong spot price
One of the strongest indications of strength in the precious metals market is seen in major precious metals equities. In general, growth in the spot market does not necessarily equate to a boost in stock prices. This is because company-specific challenges like profit margins, labor disputes, actual production numbers and brand image – among others – tend to de-couple the stock price from directly trending with the spot market.
In the last few weeks, most major equities bucked the trend by collectively going up in value as the spot posted heavy gains. This week, gold notables ABX, KGC and GOLD led the precious metal equities market by recording growth in the stock price of 7.62 percent, 8.98 percent, and 8.79 percent respectively. In particular, the Rangold Resources Limited (GOLD) stock which is the most valued of the three has gained a cumulative 23.43 percent in just over 30 days of trading. This has put the value of the stock above the $120 barrier, the first time since it actively started trading in 2002.
Other equities which were also in the green include Silver Wheaton (SLW), Anglo-American Platinum Limited (AGPPY), and Anglo-American PLC (AUKKY) which posted in-week gains of 9.52 percent, 2.26 percent, and 6.16 percent respectively. All three are actively traded stocks in silver, platinum and palladium mining respectively.
Spot Price trends from Kitco.
ETF and equities data from Yahoo.
More extensive precious metals futures data from Bar Chart Metals.