How The FOMC Announcement Affected Precious Metal Prices

Precious metals stocks and precious metals reacted positively to Federal Reserve Chairman Jerome Powell’s announcement that interest rates will by 0.75%. Because this sector is traditionally considered an inflation hedge — although not so much lately — the slightly upward move may be a little surprising. 

Taking rates higher is designed to stop inflationary trends.

The daily price chart of the SPDR Gold Trust GLD looked like this at the close Wednesday:

The bullish engulfing candlestick — where the price goes lower than the previous day and then closes higher — is said to be a good sign. The relative strength indicator (RSI) and the moving average convergence/divergence indicator (MACD) in below the price chart are forming positive divergences to price. SPDR Gold shares closed up 0.46%.

iShares Silver Trust SLV closed up 1.86%, outperforming gold and with improved trading volume.

Although it’s probably early to say that the price of silver has bottomed, it’s clear that both the RSI and the MACD are showing positive divergences to recent price lows — a good sign, according to standard technical analysis.

The VanEck Sector Gold Miners Exchange Traded Fund GDX, a diversified collection of gold stocks, closed higher by 0.34% Wednesday. 

While it’s not much higher, it’s not down after Powell’s anti-inflationary rate hike remarks. Although the MACD indicator suggests the potential for a bottom, the RSI is not quite there yet to confirm it.

Newmont Corp. NEM is the largest precious metals operation traded on the New York Stock Exchange and closely followed as a bellwether for the sector.

The stock closed lower by 0.93% Wednesday, tamping down whatever bullishness might have been evident in the sector. Note that Newmont managed to remain above the late August/early September lows and that both the RSI and MACD indicators are in positive divergence mode.

Barrick Gold Corp GOLD is the other large mining company widely followed by the precious metals crowd.

Barrick closed higher by 0.86%, a different kind of look than Newmont’s close after Powell’s announcements. This precious metals stock has a chart showing positive divergences on both the relative strength indicator and with the moving average convergence/divergence indicator.

October’s consumer price index and producer price index readings might be the next catalyst for this sector. Expectations about those inflation readings will affect gold and silver stocks until then.

Read next: How To Hedge Against Stock Market Losses With A Gold IRA

Charts: Courtesy of StockCharts