|Dovish Stance By Fed Bolsters Gold And Silver Prices |
Los Angeles CA, (Tangible Investments) - by James O’Dell - Precious metals prices held onto gains over the weekend after turning sharply higher on Friday, as Gold gained $11.70 or 1.00 percent to finish the week at $1,182.70 an ounce, while the dollar weakened and treasury yields slid in the aftermath of the Fed's policy meeting. The price of Silver soared $0.61 or 3.78 percent to end the week at $16.76 an ounce, while the Gold/Silver ratio, the measure of the number of Silver ounces needed to buy an ounce of Gold, fell to 70.57.
The week began with the head of the International Monetary Fund (IMF), Christine Lagarde, reiterating the IMF’s forecast that the global economy would grow by 3.5 percent in 2015, and 3.7 percent next year. And although it has been more than six years since the global financial crisis, “This is still below what could have been expected after such a crisis,” said Lagarde in a speech to women students last week in New Delhi. “Looking ahead, something better may yet come on the back of low oil prices and interest rates. Still, there are significant risks to this fragile global recovery,” said Lagarde.
The rhetoric between Greece and Germany has turned nasty with Greece calling for WWII reparations from Germany, the country pushing hardest for Athens to stick to prior Greek government bailout commitments. In an emotional speech before the Greek parliament last week, Greek Prime Minister Alexis Tsipras said Berlin had an "unfulfilled moral, as well as material historic debt," to pay reparations to Greece.
German Finance Minister Wolfgang Schaeuble claimed that the Greek government had destroyed any trust that it had rebuilt in the past. Noted economist, Nouriel Roubini warned that a "Greek Exit" from the European Union (EU) due to this confrontation between Germany and Greece would lead to contagion and other "weak sisters" also exiting the EU. "It doesn’t make sense to have a Greek exit,” said Roubini. “There would be massive contagion.”
On Wednesday, Gold immediately spiked to near $1,174.00 an ounce, following the release of the Fed policy statement, as the market deemed the statement to be much more dovish than hawkish. The yield on U.S. 10-year Treasuries fell below 2 percent while the euro rose sharply against the dollar. Policymakers cut the GDP outlook for 2015 to between 2.3 and 2.7 percent, that's 30 basis points below the December forecast.
The FOMC said in its policy statement that it will no longer remain “patient” on interest rates but analysts now believe that it is unlikely policymakers will hike rates before September, if then.
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