Federal Reserve Officials Jawbone Investors; Gold Hits 1-Month Low

Gold

On Tuesday, gold (NYSEARCA:GLD) futures for December — the most active contract — dropped $9.90 to close at $1,271.20 per ounce, while silver (NYSEARCA:SLV) futures fell 50 cents lower to finish at $20.78. Major exchange-traded funds, like the SPDR Gold Trust and iShares Silver Trust, also closed in negative territory.

Gold and silver both experienced selling pressure as Federal Reserve officials continue to jawbone financial markets. Richard Fisher, president of the Federal Reserve Bank of Dallas, told CNBC that the “balance sheet is $4 trillion and there are limits to what the Federal Reserve can do.” He also added, “Our balance sheet has become bloated and at some point, we will have to taper back on the pace of purchases, but that doesn’t mean we’ll stop.”

Last week’s better-than-expected jobs number ignited another debate about a December bond taper. According to the Department of Labor, the economy added a net 204,000 jobs in October, topping estimates calling for only 120,000 jobs. Even more encouragingly, the September gain was upwardly revised to 163,000 from 148,000, and August’s payroll additions were upwardly revised to 238,000 from 193,000.

Additionally, Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, commented that bond purchases were not meant to be a permanent fixture of policy. He believes tapering could take place next month, but also left room for the status quo of bond purchases and record low interest rates.

“Even with better growth, in all likelihood, at year-end 2014, inflation will still be too low and employment levels will be well short of the goal,” said Lockhart. “Therefore, monetary policy overall should remain very accommodative for quite some time.”

By the end of the trading day, shares of the SPDR Gold Trust (NYSEARCA:GLD) dropped 1.2 percent while the iShares Silver Trust (NYSEARCA:SLV) fell 2.9 percent. Gold miners (NYSEARCA:GDX) Newmont Mining (NYSE:NEM) and Yamana Gold (NYSE:AUY) declined 2.2 percent and 1.8 percent, respectively. Shares of Endeavour Silver (NYSE:EXK) plunged more than 3 percent.

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Disclosure: Long EXK, AG, HL, PHYS