Gold & Silver Daily Market Recap:June 20th, 2012

Spot gold back tracked towards $1600 prior to the US Federal Reserve releasing their announcement as the weak remaining longs decided to shed positions.

With the Fed's decision to extend operation twist until the end of the year should have been bullish commodities, but with the Fed's not mentioning QE3 per say the market was a bit disappointed. The yellow metal extended its losses as gold dropped to a monthly low of $1590 after the announcement.  It will continue the longer-term bond buying through the end of the year. The bank has been selling $400 billion US in short-term Treasuries since September and buying longer-term Treasuries. It says it will shift another $267 billion through December. The fed's left interest rates unchanged and pledge to keep loose monetary policy until 2014 and they also said "They will take further action as appropriate". As with gold, the Euro sold off initially but recovered to trade back above 1.2700. The Fed's did exactly what was expected, but again the market was whipsawed and weak players were shaken out. The market has since recovered and is trading well above $1600.

In the Eurozone, positive developments out of Greece also gave metals some support as after weeks of uncertainty  Greece welcomed in a new government on Wednesday that will put it back at Europe’s bargaining table, ending a seven-week leadership vacuum that had destabilized the fragile nation and cast a shadow over the euro zone’s future. This for the time being, should take some pressure of the eurozone but not too long as Spain, Italy and Portugal are all teetering on the brink of collapse. Greece's problem is that its public debt is around 160% of GDP and growing. Because Greece is relatively small, what the market is really worried about is the possibility of "contagion," with the crisis spreading to the much larger economies of Spain and Italy. Both have high levels of debt that need to be refinanced by selling government bonds.

Spot silver took a tumble as well after the release of the minutes. The dual role metal fell to $27.80, but recovered alongside equities.  The gold silver ratio held its range still nearing 2011 highs of 58.22.

June 20th Closing Prices