Gold and silver futures fell apart in the afternoon session following Janet Yellen’s press conference. The Fed as expected raised rates a quarter point, however the Fed Chair’s comments were seen as hawkish and supportive for the Dollar. She left the door open for continued unwinding of the Fed’s balance sheet which means an unwind of their $4.5 trillion balance sheet bond portfolio, while noting that further rate increases are likely to come. The hawkish view on rates may have caught precious metal bulls by surprise as August gold futures were trading near 1260.0 an ounce near the electronic close down almost $15.00 from settlement in late afternoon trading. July silver futures were down almost .28 cents from settlement trading below $17.00 an ounce at 16.86. Yellen said that because of current economic conditions, the committee anticipates further interest rate increases this year and next. The Fed Chair then shrugged off weak inflation concerns despite the Fed’s forecast of 1.6 percent inflation according to projections this year. Clearly the Fed Chair is focused more on perceived future economic growth rather than the Fed’s own inflation expectations of 2 percent. The stock market and bond market reaction to Yellen’s comments were largely muted as both moved slightly lower while the Dollar rallied.
Chart action for both gold and silver will be paramount going forward after the late session sell-off today. The 50 day moving average is where gold is trading as of this post at 1263.9. Should gold not hold this level, the 100 day at 1249.9 and the 200 day at 1251.2 will need to hold or the market could retest the mid-April lows just below 1220.0. Keep in mind August gold traded all the way up to 1284.0 in early morning trading following disappointing CPI and retail sales results. For July silver, second support for the week is down at 16.78. A close below here sends the market to 16.56.