Gold and Silver Plunge as Fed Keeps Printing $85 Billion Per Month

By Roger Baettig | February 20 2013 5:17 PM

Reuters

Gold coins from a treasure trove of gold and silver coins worth $500 million and recovered from a Spanish ship believed to be from the wreckage of the Nuestra Senora de las Mercedes, a ship sunk by the British Navy in 1804 as it returned from South America, are handled by a Spanish expert at an undisclosed warehouse in Sarasota, Florida in this handout photo released February 23, 2012.

Sponsorship Link

On Wednesday, gold (NYSEARCA:GLD) futures for April delivery, the most active contract, fell $26.20 to settle at $1,578 per ounce, while silver (NYSEARCA:SLV) futures for March plunged 80 cents to close at $28.62. The price of gold has now declined for five consecutive trading sessions to post its lowest close since July.

Both precious metals witnessed heavy-selling pressure, as the U.S. dollar climbed higher. Although the Federal Reserve decided to keep its current $85 billion/per month quantitative easing programs in place, it is injecting fear on how long they will continue.

According to the new Federal Open Market Committee minutes, several members want the central bank to prepare for a day when it does not have to keep the economy afloat with the current QE programs.

The statement explains, “Several participants emphasized that the Committee should be prepared to vary the pace of asset purchases, either in response to changes in the economic outlook or as its evaluation of the efficacy and costs of such purchases evolved. For example, one participant argued that purchases should vary incrementally from meeting to meeting in response to incoming information about the economy. A number of participants stated that an ongoing evaluation of the efficacy, costs, and risks of asset purchases might well lead the Committee to taper or end its purchases before it judged that a substantial improvement in the outlook for the labor market had occurred.”

By the end of the day, the SPDR Gold Trust (NYSEARCA:GLD) fell 2.5 percent, while the iShares Silver Trust (NYSEARCA:SLV) plunged 3 percent. Gold miners (NYSEARCA:GDX) such as Yamana Gold (NYSE:AUY) and Barrick Gold (NYSE:ABX) both fell about 4 percent. Silver names such as Hecla Mining (NYSE:HL) and Endeavour Silver (NYSE:EXK) both crashed more than 7 percent.