Fed drives gold and precious metals miners

Randgold Resources (RRS) and Fresnillo (FRES) are both top of the FTSE100 this morning, helped by a slightly more dovish Fed update than expected last night (cautiously hawkish?) which served to weaken the dollar to the benefit of the precious metals and their miners.

The US central bank last night maintained that its first rate hike since 2006, and since hitting all-time lows in 2008 amid the financial crisis, remains data-dependent, giving it room to keep delaying.

FOMC members remain divided about whether we would see one or two hikes by year-end and now expect a shallower trajectory for lift-off.

The committee also cut its 2015 US GDP growth forecasts after a tough start to the year for the world’s #1 economy. The possibility of a US rate hike not being as imminent as markets think and that rates mightn’t rise as quickly as thought to as high as thought has seen the dollar fall to 1-month lows.

Safehaven demand from flat-lining Greek debt negotiations is also likely helping as the clock ticks closer to default, along with existing concerns related to China growth and the Middle East.

Gold almost back to 10 June highs of $1,193 while silver does the same versus yesterday’s and Monday’s highs just shy of $1,630. A weaker dollar helps in terms of making them cheaper from a relative standpoint for non-dollar buyers.

 

Mike van Dulken is head of Research at Accendo Markets

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