Gold & Silver Daily Market Recap: December 13th, 2012

Precious metals rallied in the hours after the Federal market open committee released the minutes of the meeting. Spot gold touched a two week high of $1723 as the Fed essentially announced QE4.

The Fed announced it would expand the third round of its bond buying with fresh stimulus, replacing the soon to expire Operation Twist, set to end December 31st. The Fed will buy $45 billion per month of Treasury securities starting in the New Year; this of course will be in addition to its open-ended bond buying programme (QE3) that it announced in September. There seems to be a new Federal Reserve outlook for monetary policy as they tied the ending of stimulus to the elevated unemployment rate. The national unemployment rate will have to drop to 6.5% before the Fed moves rates up from the current exceptionally low level of 0-0.25%. Previously, the policy committee pledged to keep rates low until mid-2015. Another key component is that the Feds will allow a maximum inflation rate of 2.5%.

U.S data was right back in line to pre-hurricane Sandy levels as initial jobless claims dropped to 343,000, much better than the expected 370,000. These are levels the U.S hasn't seen since January 2008 and could drop the unemployment rate down to the 6.5% target the Feds are looking for thus ending QE sooner than anticipated.

This took a little of the shine off the yellow metal as selling increased at the open of the Asian market, much can be attributed to the selling being exacerbated by breaching stop loss levels. The metal has since recovered to trade around the $1700 level as again we stated we should see dip buying increase when the metal sells below $1700. The major impact that is clear in the eyes of traders is the fiscal cliff, if the US went over the "cliff", the Fed Chairman Ben Bernanke said the Fed "would not be able to take action that could sufficiently offset the negative impacts of $600 billion in harsh tax increase and spending".  The long term bull trend has not been damaged; ultra low real interest rates and the continued central bank buying will keep gold's long term bullish view intact.

Spot silver didn't fair as well as its bigger brother, the metal broke to the down side and breached support at $32.50. The gold silver ratio broke higher but still remains range bound as it targets within its range a high of 52.78.

 December 13th Closing Prices