After all the hype and speculation, the market finally received its long-awaited third round of quantitative easing yesterday. Equities instantly climbed higher on the news, but gold and silver had the strongest response.
Both precious metals received a pop mid-day as the Federal Reserve pulled the trigger on another quantitative easing program. The central bank announced it will purchase additional agency mortgage-backed securities at a pace of $40 billion per month.
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The Federal Reserve also explained it “will continue through the end of the year its program to extend the average maturity of its holdings of securities as announced in June, and it is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. These actions, which together will increase the Committee’s holdings of longer-term securities by about $85 billion each month through the end of the year.”
The news sent all three major indices higher, but gold and silver were among the best performers. Despite trading as low as $166.30 a share before the Fed announcement, the SPDR Gold Trust (NYSEARCA:GLD) reversed losses and rose to $170. Meanwhile, the iShares Silver Trust (NYSEARCA:SLV) jumped more than 2 percent. Gold miners (NYSEARCA:GDX) such as Barrick Gold (NYSE:ABX) and Yamana Gold (NYSE:AUY) also gained more than 2 percent. Silver names Hecla Mining (NYSE:HL) and Endeavour Silver (NYSE:EXK) popped 2.41 percent and 3.18 percent, respectively.
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Disclosure: Long EXK, AG, HL, PHYS