Strong declines in gold and silver

2021-11-23 22:15

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2021-11-23 22:15

Strong declines in gold and silver
Strong declines in gold and silver
photo: corlaffra / / Shutterstock

In less than 48 hours, an ounce of gold fell by more than $ 60, and the silver price fell by more than 5%. The sell-off of precious metals was explained by the expectations of a “tightening” of the ultra-loose monetary policy of the Federal Reserve.

It all started on Monday around 3 p.m. Polish time. It was then that news emerged that US President Joe Biden had nominated Jerome Powell for a second term as chairman of the Federal Reserve. This news gave the dollar a bit of a boost, as Powell is considered not as much of a “dove” as his opponent, well-established official Lael Brainard.

While Powell himself is also a monetary “dove” (ie, he prefers to tolerate higher inflation and is reluctant to raise interest rates), his nomination has remained in the market as political endorsement of a less expansive Fed rate. Investors speculate that the bond purchase program (QE) will end by mid-2022 and that then the FOMC will also make the first interest rate hike.

This contributed to a slight increase in market interest rates. The yield on 10-year US government bonds rose from 1.55% to 1.68% in two days and reached the highest level in a month. However, these values ​​are still very low and clearly lower than both the current and expected CPI inflation in the coming years. Nevertheless, some investors may have concluded that significant increases in federal funds rate were on the way, which would change the picture.

At the same time (although it is not known whether for the same reason) there was an intense decline in the quotations of gold and silver futures. Gold prices in dollar terms fell rapidly from around $ 1,840 / oz. up to 1,815 USD / oz. and after breaking this support, they fell to around $ 1,790 / oz., stopping only at their 200-session moving average. In this way, the November rises were wiped out, as gold prices responded to the highest reading of CPI inflation in the United States in 30 years.

Traditionally, silver has been battered even more than gold, and it went down from almost USD 25 to USD 23.65 / oz. In this way, the price of the white metal returned to the level from the beginning of the month, giving up almost half of the gains from the October-November upward wave.

– Inflation still has a lot of room to accelerate, and in addition, covid restrictions reappear in Europe. It’s too early to scratch gold, but it is on the bull camps to defend this thesis and seek support, commented Ross Norman, an independent gold market analyst.

It is also worth adding that the situation of gold looks completely different from the point of view of a long-term investor from Poland. On Friday, the price of gold expressed in PLN reached the all-time nominal record of almost PLN 7,750 per ounce. On Tuesday evening the prices fell to 7,480 PLN / oz, which is still 5.5% higher than at the beginning of the year.

KK

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About Eric Wilson

The variety offered by video games never ceases to amaze him. He loves OutRun's drifting as well as the contemplative walks of Dear Esther. Immersing himself in other worlds is an incomparable feeling for him: he understood it by playing for the first time in Shenmue.

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