Fool's Gold Report: Silver, Platinum Keep Falling as Gold Recovers From Worst Losses

On Thursday, investors continued to wrap their heads around the prospect of higher interest rates as soon as mid-2015, as disagreement about how serious Fed Chair Janet Yellen's comments about monetary policy were in indicating future Fed policy gave way to hopes that rates will stay low for a longer period. Although the stock market rose substantially, precious metals were largely unchanged to down, as futures caught up with the fall in spot prices after Wednesday's settlement. April gold futures settled down another $11 per ounce to $1,330.50, while May silver dropped almost $0.40 per ounce to $20.43. But even though iShares Silver (NYSEMKT: SLV  ) fell another 1.5% due to further declines, losses for the SPDR Gold Shares (NYSEMKT: GLD  ) were minimal, and the Market Vectors Gold Miners ETF (NYSEMKT: GDX  ) actually managed to gain ground on the day.

Metal

Today's Spot Price and Change From Previous Day

Gold

$1,328, down $3

Silver

$20.27, down $0.34

Platinum

$1,428, down $12

Palladium

$766, up $6

Source: Kitco. As of 4:15 p.m. EDT.

Image sources: Wikimedia Commons; Creative Commons/Armin Kubelbeck.

Did the Fed mean it?
Yesterday, Yellen's comments had huge reactions on a number of key markets that affect gold. Interest rates rose substantially, making Treasuries look more attractive to those income-hungry investors looking to reduce their risk. A rising U.S. dollar also weighed on gold, as much of 2014's gains have been driven, in part, by weakness in the dollar compared to the euro and other key currencies. Plunging stock markets added to a general sense of unrest among investors, and gave further support for their moves to remove risk from their portfolios.

Today, we've seen some tempering of those interest rate fears. Investors have never perceived Yellen as particularly hawkish on monetary policy and, regardless of her comments yesterday, many believe that she won't recommend a higher Federal Funds rate until the unemployment situation becomes much less of a problem than it is now. In response, stocks have gained back much of their lost ground.

Although gold did recover from earlier losses of more than $10 on the day, it's still somewhat troubling to see the market not join stocks in getting back at least part of its steep losses. Moreover, silver and platinum kept falling today, adding to the sense of unease in precious metals. Yet, given the magnitude of the rise in bullion prices during the past few months, short-term traders were bound to introduce some volatility into the precious-metals market, and Yellen's comments gave them the excuse to do so. Moreover, Barrick Gold (NYSE: ABX  ) , Goldcorp (NYSE: GG  ) , and other major players have worked hard to cut their costs, and as the fundamentals of mining improve, stocks could continue to benefit, even if bullion prices stagnate.

In the days ahead, watch gold to see how investors respond to its recent pullback. If the bull market in gold is back, then many might see a small dip as a chance to buy.

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  • Report this Comment On March 20, 2014, at 6:21 PM, dlwatib wrote:

    Higher interest rates, when they finally get here, are likely to precipitate a governmental crisis that is going to be good for gold. We have 17 trillion dollars of debt and counting. Even a percentage point or two of higher interest rates are going to be really painful. Either the government cuts back on spending (as if that's a real option) or they raise taxes even more (yeah, right) or they let the deficit start growing again or Congress starts pushing back on the Fed to rein in interest rates. In pretty much all of those scenarios the economy tanks and gold wins.

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