The Daily Market Report: Gold Firms Ahead of Fed Policy Statement, Silver Surges 2.5%


USAGOLD/Peter Grant/11-01-17

Gold heads into the Fed policy statement on a modestly more positive footing within the range. The yellow metal set a new high for the week in earlier trading before moderating slightly.

The policy statement comes out at 2:00ET. It is widely anticipated that the Fed will hold steady on policy. What remains to be seen is if they will reinforce expectations of a December hike, or seek to temper those expectations with more dovish guidance.

As always, the jobs report is also going to be seen as a potentially significant market mover. The market is looking for a solid rebound from the dismal September print of -33k jobs. Median expectations are +318k nonfarm payrolls.

That’s a pretty high bar to attain, following the first negative print in 7-yeaers. Today’s ADP survey results offered some encouragement, coming in better than expected at +235k private payrolls. However, September was negatively revised from +135k to +110k.

Silver is showing particularly good buoyancy, gaining more than 2.5% and reclaiming the 17-handle. This could be some short-covering in the paper market ahead of the Fed decision, but it’s also worth noting the improving demand picture for physical silver. The U.S. Mint reported that silver eagle sales rebounded to 1,040,000 in October, up 225% from the 320,000 sold in September. Industrial demand is reported to be improving as well.

It is believed that gold and silver will benefit from the passage of tax reform, the details of which are expected to be revealed by the House tomorrow.

The tax plan being considered in Congress would inflate the nation’s budget deficit and expand the debt, Bart Melek, head of global commodity strategy at TD Securities in Toronto, said at the Silver Industrial Conference in Washington. That deterioration in the nation’s fiscal standing is a recipe for higher silver and gold prices, he said. — Bloomberg

Gold is arguably extremely undervalued relative to stocks and other risk assets, but silver is very undervalued relative to gold. We may be seeing early signs of positioning ahead of the tax plan and that deterioration of the nation’s fiscal position.

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