Gold and silver gained on July 27
Gold and silver prices inched higher on July 27 amid the release of the FOMC (Federal Open Market Committee) statement. At 2:40 PM EST on July 27, the COMEX gold futures contract for December delivery was trading at $1,338.75 per ounce—a gain of ~0.76%. Silver was trading at $20.14 per ounce—a surge of ~2.4%.
“Near-term risks to the economic outlook have diminished”
The Fed left interest rates unchanged at 0.25%–0.5% in its two-day meeting ending on July 27. In the FOMC statement released at 2:00 PM EST, the Fed noted that “near-term risks to the economic outlook have diminished.” It also said that the labor market “strengthened” and household spending is “strong.”
Regarding economic activity, the statement noted that it’s expanding at a moderate rate. The Fed has three more meetings left in 2016—September, November, and December. After the release of July’s FOMC statement, there was an increase in the chances of an interest rate hike in 2016. The chance of an interest rate hike in September 2016 rose to 33% on July 27 after the FOMC statement from 25% the day before. An increase in the interest rates will dent the sentiment in the gold market. Read Why Gold Is Closely Tied to Interest Rates to learn why interest rates impact gold prices.
Gold spiked after the FOMC statement
There was increased volatility and a surge in gold prices right after the release of the FOMC statement on July 27. It rose to the highest level traded since July 12. At 3:00 PM EST on July 27, precious metal producers Barrick Gold (ABX), Newmont Mining (NEM), Silver Wheaton (SLW), and Royal Gold (RGLD) gained ~4.4%, ~3.0%, ~4.2%, and ~3.6%, respectively. The SPDR Gold Trust ETF (GLD) gained ~1.3%.
In the next part, we’ll discuss how copper performed on July 27.