How Much Does the FOMC Impact Silver?



Silver futures peak on July 1

Silver futures for September expiration touched the highest level of approximately $20 on Friday, July 1, 2016. Gold reached the highest mark of $1,347 per ounce. Platinum and palladium touched their highest levels of $1,066.10 and $607 per ounce, respectively.

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US Dollar Index

The rise in precious metals was supported by the fall in the US dollar. Since all these precious metals are dollar-based assets, a decline in the dollar gives wings to these assets. The US dollar, depicted by the U.S. Dollar Index (or DXY), has seen a year-to-date fall of 2.4%.

The DXY currency index prices the US dollar against a basket of six major world currencies, including the Swiss franc, the Swedish krona, the Canadian dollar, the euro, the Japanese yen, and the sterling pound.

DXY declined 0.5% to settle at 95.7 on Friday. When it became apparent that the FOMC (Federal Open Market Committee) was not going to raise the interest rate, the US dollar started retreating and gave some buoyancy to precious metals, including silver.

The FOMC’s outlook dims

FOMC members will meet again in July before breaking until September. The FOMC downgraded its outlook on economic growth and interest rates at its June policy meeting. FOMC hawk James Bullard also recently admitted to being the lowest dot on the Fed’s “dot plot” chart of interest rate expectations.

The SPDR Gold Shares (GLD) and the iShares Silver Trust (SLV) increased 0.83% and 1.3%, respectively, on Friday, July 1.

NewGold (NGD), Royal Gold (RGLD), and Sibanye Gold (SBGL) increased 0.84%, 0.44%, and 3%, respectively, on Friday, July 1.


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