Daily Market Report 9/19/13

GOLD

In a surprise move, the Federal Reserve said late yesterday that it would continue its $85 billion bond-buying program for at least another month. After the announcement Gold quickly rallied $50 and continued higher last night and again this morning.

Since last September, the Fed has been buying $85 billion in bonds each month in an effort to lower long-term interest rates, particularly on mortgages. This stimulus program was designed to fire up the U.S. economy. The Fed plans to keep that strategy in place for the time being, and will re-evaluate the policy at its next meeting at the end of October.

The Fed said in the statement that it will maintain the pace of its bond purchases while it awaits conclusive evidence that the economy will strengthen. The Federal Reserve also downgraded its U.S. economic growth outlook for the balance of this year and 2014. Logic dictates that if you are lowering your outlook for the economy, you wouldn’t cut back on your stimulus program, however markets aren’t always logical.

At 11am PDT today, Gold is up $60 per ounce, the largest increase I have seen in more than 4 1/2 years, trading at $1,370 per ounce on heavy volume.

SILVER

After yesterday’s Federal Reserve statement Silver moved up $1.20 per ounce immediately. The monthly $85 billion stimulus program is considered inflationary and therefore should be more helpful to the Silver price then Gold. Today’s Silver percentage increase was 7.4% compared to Gold increasing 4.5%.

At 11am PDT Today, Silver is trading at $23.22 per ounce, up $1.60 on heavy volume.