Gold, Silver Take Hits After FOMC Meeting

by Andrew Burger | April 4, 2012 1:24 pm

Gold, silver and mining stocks were taking big hits Wednesday morning following yesterday’s release of the Federal Open Market Committee meeting’s minutes and a subsequent readjustment of the dollar/euro exchange rate. Spot gold was sharply lower, down 1.64% as of 12:10 pm, having traded as high as $1,627.80 and as low as $1,612 an ounce, according to Kitco market data[1]. The London afternoon reference price was set at $1,621, a whopping $55 an ounce lower than Tuesday’s afternoon reference price.

Spot silver was showing a deep 3.89% loss, bid at $31.41, with an ask price of $31.51. The morning high as of time of writing was $31.98 and the low was $31.17. Wednesday’s reference price was set at $31.98 in the London a.m., 99 cents an ounce below Tuesday’s price fix.

Private-sector U.S. nonfarm payrolls increased[2] 209,000 on a seasonally adjusted basis in February, according to the March 2012 ADP National Employment Report. ADP also revised estimated gains from December-January — revised up 9,000, to 182,000 — and January-February — revised up 14,000, to 230,000.

The European Central Bank left its base bank lending rate unchanged[3] and decided to take a wait-and-see approach before ending its Long-Term Refinancing Operations program, which is credited with boosting EU bank demand for eurozone government bonds and thereby keeping their yields, and eurozone interest rates, lower than they otherwise would have been.

That said, German factory orders increased less than expected in February, while eurozone retail sales decreased 0.1%[4] across the 17-nation eurozone bloc. The yield on the benchmark five-year Spanish treasury note[5] increased to 4.49%, its highest level in three months prior to a disappointing $2.6 billion auction of Spanish government bonds. That sent the euro lower vis-a-vis the dollar[6], which, if form holds, put downward pressure on gold, silver and stocks.

The price of gold bullion hit a three-month low, falling to $1,622 an ounce, in London morning trading Wednesday in the wake of yesterday’s release of the FOMC meeting’s minutes, BullionVault reported in its London Gold Market[7] report.

The FOMC minutes are “in line with what Bernanke said in February,” BullionVault quoted HSBC chief commodity analyst James Steel. “Nonetheless, it’s enough to reduce the near-term bullish momentum.”

“Gold really does need the physical markets to step in right now,” UBS added in a research note. “So far, the response has been limited. The jewelers’ strike in India persists, overnight demand from that region was poor and the Chinese market is closed, but returning tomorrow.”

Gold and silver trusts were taking big hits in U.S. stock exchange trading.

The SPDR Gold Trust (NYSE:GLD[8]) was down around 1.7%.
The iShares Gold Trust (NYSE:IAU[9]) was down around 1.75%.
The iShares Silver Trust (NYSE:SLV[10]) was down more than 3.7%.

Gold and silver mining ETFs were falling fast and hard, with the GlobalX Silver Miners ETF more than 5% lower.

The Market Vectors Gold Miners ETF (NYSE:GDX[11]) was showing losses of around 4.3%.
The Market Vectors Junior Gold Miners ETF (NYSE:GDXJ[12]) was showing losses of more than 5%.
The Global X Silver Miners ETF (NYSE:SIL[13]) was down around 5.25%.

Gold mining shares were heading south quickly as well.

Agnico-Eagle Mines (NYSE:AEM[14]) was showing losses of around 3.4%.
Barrick Gold (NYSE:ABX[15]) was down around 3.6%.
Eldorado Gold (NYSE:EGO[16]) was down more than 3.9%.
Goldcorp (NYSE:GG[17]) was more than 5.4% lower.
Kinross Gold Corp. USA (NYSE:KGC[18]) was down some 3.5%.
Newmont Mining (NYSE:NEM[19]) was down around 4.3%.
NovaGold Resources (NYSEAMEX:NG[20]) was sharply lower, down more than 4.8%.
Yamana Gold (USA) (NYSE:AUY[21]) was down more than 3.8%.

Bids on silver mining shares also were being hit hard across the board.

Coeur d’Alene Mines (NYSE:CDE[22]) was showing losses of around 4%.
Hecla Mining (NYSE:HL[23]) was down around 2.2%.
Pan American Silver (NASDAQ:PAAS[24]) was showing losses of more than 3.25%.
Silver Wheaton (NYSE:SLW[25]) was down around 4%.
Silver Standard Resources (NASDAQ:SSRI[26]) was down more than 4.1%.

As of this writing, Andrew Burger did not hold a position in any of the aforementioned securities. Adrian Ash of BullionVault contributed to this report.

Endnotes:
  1. Kitco market data: http://www.kitco.com/market/
  2. U.S. nonfarm payrolls increased: http://www.adpemploymentreport.com/pdf/FINAL_Report_March_12.pdf
  3. left its base bank lending rate unchanged: http://www.marketwatch.com/story/ecb-holds-steady-draghi-expected-to-wait-and-see-2012-04-04
  4. eurozone retail sales decreased 0.1%: http://www.reuters.com/article/2012/04/04/us-eurozone-retail-idUSBRE8330E720120404
  5. five-year Spanish treasury note: http://www.bloomberg.com/news/2012-04-04/spanish-notes-extend-decline-after-auction-italian-bonds-slide.html
  6. sent the euro lower vis-a-vis the dollar: http://www.reuters.com/article/2012/04/04/markets-forex-idUSL2E8F44GC20120404
  7. London Gold Market: http://goldnews.bullionvault.com/gold-price-040420121
  8. GLD: http://studio-5.financialcontent.com/investplace/quote?Symbol=GLD
  9. IAU: http://studio-5.financialcontent.com/investplace/quote?Symbol=IAU
  10. SLV: http://studio-5.financialcontent.com/investplace/quote?Symbol=SLV
  11. GDX: http://studio-5.financialcontent.com/investplace/quote?Symbol=GDX
  12. GDXJ: http://studio-5.financialcontent.com/investplace/quote?Symbol=GDXJ
  13. SIL: http://studio-5.financialcontent.com/investplace/quote?Symbol=SIL
  14. AEM: http://studio-5.financialcontent.com/investplace/quote?Symbol=AEM
  15. ABX: http://studio-5.financialcontent.com/investplace/quote?Symbol=ABX
  16. EGO: http://studio-5.financialcontent.com/investplace/quote?Symbol=EGO
  17. GG: http://studio-5.financialcontent.com/investplace/quote?Symbol=GG
  18. KGC: http://studio-5.financialcontent.com/investplace/quote?Symbol=KGC
  19. NEM: http://studio-5.financialcontent.com/investplace/quote?Symbol=NEM
  20. NG: http://studio-5.financialcontent.com/investplace/quote?Symbol=NG
  21. AUY: http://studio-5.financialcontent.com/investplace/quote?Symbol=AUY
  22. CDE: http://studio-5.financialcontent.com/investplace/quote?Symbol=CDE
  23. HL: http://studio-5.financialcontent.com/investplace/quote?Symbol=HL
  24. PAAS: http://studio-5.financialcontent.com/investplace/quote?Symbol=PAAS
  25. SLW: http://studio-5.financialcontent.com/investplace/quote?Symbol=SLW
  26. SSRI: http://studio-5.financialcontent.com/investplace/quote?Symbol=SSRI

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