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How the Fed Revived the Rally in Precious Metals

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Non-yield bearers breathe a sigh of relief

On Wednesday, March 16, 2016, precious metals climbed higher. However, they ended the day in negative territory. The Federal Reserve’s liftoff delay boosted precious metals. During the past week, gold prices seemed to be stabilizing and were trading in the range of $1,226 to $1,260 per ounce. As the FOMC (Federal Reserve Open Market Committee) ended its two-day meeting, the team voted to keep its benchmark interest rate between 0.25% and 0.50%. Only one member of the committee, Esther George, voted against the decision, preferring to raise the federal funds rate to 0.50% to 0.75% at this meeting.

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Global risks and inflation concerns were the Fed’s major fears about a rise in rates. Dwindling hopes for a near-term rate hike helped the non-yield-bearing assets like gold and silver. Gold touched the high of $1,267.8 per ounce on Wednesday and closed at $1,230, marginally lower than the previous day’s close. Gold saw a ~2.5% jump on the day.

Precious metals lose, but miners win

Though the precious metals initially saw gains, they ended the day in negative territory. Gold, silver, platinum, and palladium gave up 0.1%, 0.27%, 0.11%, and 0.5%, respectively, on Wednesday.

Though the metals saw a down day, most of the mining companies and precious metal ETFs surged higher. Precious metal miners Yamana Gold (AUY), Barrick Gold (ABX), and Coeur Mining (CDE) rose 7.1%, 7%, and 9.7%, respectively, on the same day. These four companies together make up 11.4% of the VanEck Vectors Gold Miners ETF (GDX). The GDX indicator gained 6.8% on Wednesday. Sprott Gold Miners (SGDM) also climbed 7.2%.

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