Gold Miners Soar Following Fed
Heading into today’s trading session the market was clearly worried about a hawkish statement from the Fed with the potential for a faster series of rate hikes than previously expected. As it turned out the Fed statement was fairly neutral and expectations are for 2 more rate hikes before the end of the year. With the worst fears for a hawkish Fed posture averted markets launched into a relief rally and the US dollar fell hard.
Another potentially market moving event came from Holland where the Dutch election result also averted the market’s worst fears with the right wing Freedom Party finishing a distant second to Dutch Prime Minister Rutte’s party. This election result is a euro positive which added further downside pressure on the US dollar.
Precious metals were bracing for the worst and the double-dose of better than feared news set off one of the strongest single-day rallies in precious metals mining shares that we have seen in quite a while. The higher beta junior gold miners/explorers (GDXJ) staged their largest single-day rally since last June with an impressive 11.5% gain:
The gains in the gold miners were broad based and impressive in magnitude with dozens of stocks posting double-digit percentage gains. This sort of powerful sector rally is characteristic of market participants rushing back into a sector for fear of missing out on a major turn in the market.
With the US Dollar Index on the verge of dropping back below the 100 level and real yields experiencing their largest single day decline in months (10-year real yield fell by more than 10 basis points) suddenly the backdrop is favorable to precious metals once again. What a difference 24 hours makes!
Gold ended the day back above its rising 50-day moving average near the key $1220 level:
The precious metals sector entered the day facing a potentially do-or-die moment and precious metals bulls must feel good with how the day transpired. There is strong potential for a relief rally to last through the end of the week and trend followers are likely to begin jumping back aboard the bandwagon as prices remain above key moving averages.
The article is for informational purposes only and is neither a solicitation for the purchase of securities nor an offer of securities. Readers of the article are expressly cautioned to seek the advice of a registered investment advisor and other professional advisors, as applicable, regarding the appropriateness of investing in any securities or any investment strategies, including those discussed above. Some of the stocks mentioned are high-risk venture stocks and not suitable for most investors. Consult the companies’ SEDAR profile for important risk disclosures.
EnergyandGold.com, EnergyandGold Publishing LTD, its writers and principals are not registered investment advisors and advice you to do your own due diligence with a licensed investment advisor prior to making any investment decisions.
This article contains certain forward-looking information and forward-looking statements within the meaning of applicable securities legislation (collectively “forward-looking statements”). Certain information contained herein constitutes “forward-looking information” under Canadian securities legislation. Generally, forward-looking information can be identified by the use of forward-looking terminology such as “expects”, “believes”, “aims to”, “plans to” or “intends to” or variations of such words and phrases or statements that certain actions, events or results “will” occur. Forward-looking statements are based on the opinions and estimates of management as of the date such statements are made and they are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company to be materially different from those expressed by such forward-looking statements or forward-looking information, standard transaction risks; impact of the transaction on the parties; and risks relating to financings; regulatory approvals; foreign country operations and volatile share prices. Although management of the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements or forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Actual results may differ materially from those currently anticipated in such statements. The views expressed in this publication and on the EnergyandGold website do not necessarily reflect the views of Energy and Gold Publishing LTD, publisher of EnergyandGold.com. Accordingly, readers should not place undue reliance on forward-looking statements and forward looking information. The Company does not undertake to update any forward-looking statements or forward-looking information that are incorporated by reference herein, except as required by applicable securities laws. Always thoroughly do your own due diligence and talk to a licensed investment adviser prior to making any investment decisions. Junior resource companies can easily lose 100% of their value so read company profiles on www.SEDAR.com for important risk disclosures. It’s your money and your responsibility.