Will Gold and Silver Tumble Further?

The prices of gold and silver plummeted in the past week to their lowest levels since July 2013.Will the recent freefall of gold and silver continue? Let’s examine the latest news that may affect gold (GLD) and silver (SLV) prices.

The ongoing decline in the prices of silver and gold has also reflected in the drop in demand for leading precious metals’ ETF such as SPDR Gold and Shares Silver Trust. During November, the SPDR Gold’s holdings fell by 2.3%; Shares Silver Trust’s silver holdings inched down by approx. 0.1%. The progress of the U.S economy and the speculations around the Fed’s future changes to its monetary policy may have driven down the demand for gold and silver as investments.

FOMC’s policy and precious metals

The minutes of the last FOMC meeting back in October, which ended with no change to the Federal Reserve’s policy, may have reignited the speculations around the FOMC’s policy; specifically, the FOMC’s decision to start tapering its asset purchase program. Some suspect the FOMC may announce this change to policy in the last meeting of the year on December 17-18. It was announced a few months back that the Fed will start scaling down the long term securities purchase program (QE3), the question remained when it will commence. This decision may have contributed to the sharp fall in precious metals prices in recent months.

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