Silver futures bounced back into positive territory while gold pared earlier losses Wednesday as investors continued to sift through the Federal Reserve’s policy statement.
Silver futures for July delivery, the most active contract, settled up 2.1 cents, or 0.1%, at $28.389 a troy ounce in after-market trading on the Comex division of the New York Mercantile Exchange.
Gold futures for August delivery, the most active contract, settled down $7.40, or 0.5%, at $1,615.80 a troy ounce.
“There’s a slight increase in accommodative monetary policy by the Fed. The fact is they are being accommodative and this is more than we had before,” said Jason Schenker, president of Prestige Economics LLC.
The Fed said it would continue selling short-term bonds and using these funds to purchase long-term bonds through the end of 2012 with the aim of lowering long-term interest rates and encouraging borrowing, in what is known as the Operation Twist program. The program had been expected to end this month.
Fed Chairman Ben Bernanke said at a press conference that the central bank’s decision to extend Operation Twist is a “substantive” step to aid the economy, but stressed that additional stimulus options remain.
Precious-metals prices initially had turned lower on disappointment that the central bank avoided more aggressive options. Gold futures had slipped below the psychologically important $1,600 level.
“Obviously, the market was disappointed that there wasn’t more definitive liquidity measures taken by the Fed,” said Dave Meger, head of trading at Vision Financial Markets.
Operation Twist isn’t considered a bullish factor for gold markets because it doesn’t increase the central bank’s balance sheet and thus isn’t likely to trigger inflation, Mr. Meger said.
However, Fed officials also signaled they “were prepared to take further action” if the economy or the labor market required an additional boost.
Moreover, with interest rates set to remain near zero until 2014 and the European debt crisis still on the radar, precious-metals prices have several supportive factors to fall back on, Mr. Meger said.
Silver futures had outpaced gold both on the way down and the subsequent recovery, with silver briefly trading in positive territory in the wake of the Fed statement.
“It’s very typical for silver, on both ends of the market, to be the volatile sister of gold,” said Mr. Meger.
Settlements (ranges include open-outcry and electronic trading):
London PM Gold Fix: $1,601.00; previous PM $1,625.50
Aug gold $1,615.80, down $7.40; Range $1,590.50-$1,623.60
Jul silver $28.389, up 2.1 cents; Range $27.630-$28.595
Jul platinum $1,466.80, down $13.70; Range $1,451.80-$1,487.40
Sep palladium $619.50, down $9.90; Range $614.70-$632.00
- Tatyana Shumsky at Dow Jones Newswires.