Gold, Silver Plunge After Fed Hikes Interest Rates

Gold and silver prices plunged after the US Federal Reserve announced a rate hike for the first time in 2016, plus three more hikes anticipated in 2017.
Gavin Graham, Chief Strategy Officer of Integris Pension Management, says that the rate hike is “now a Christmas tradition” — Yellen raised interest rates in December 2015.
Gold plummeted by 2.6 percent to a 10-month low of $1,129.40 (as of 10am PST). February delivery Comex gold futures were also down by 2.9 percent to $1,130.40 an ounce.

The Financial Post wrote that gold is down due to the outlook for borrowing rates and a stronger US dollar, as well as expectations on President-elect Donald Trump’s infrastructure plans. “Higher borrowing costs tarnish bullion’s allure as the metal doesn’t bear interest,” they wrote.
Silver plunged to as as much as 2.7 percent to $16.01 an ounce (as of 10am PST), and March delivery Comex Silver slipped 6.4 percent.
In a note published December 14, Sprott warned that “we’re likely to see big swings directly post announcement.” The investment firm also stated that a rising US dollar would also provide “negative headwinds for the gold price”.
Indeed, the US dollar was on a 14-year high after the Federal Reserve announcement.
Bob Baur, Chief Global Economist at Principal Global Investors said in an interview with Reuters that they expect higher stock prices, coupled with, “faster nominal growth, mildly higher interest rates and just a bit more inflation.”
The Financial Post wrote that gold ETF holdings had the “biggest daily outflow since July 2013.” Gold miners also took a hit: gold producers Barrick Gold (TSX:ABX) down by 3.94 percent, AngloGold Ashanti (NYSE:AU) down by 4.96 percent, Newmont Mining Corp(NYSE:NEM) down by 2.15 percent as of 10am PST, December 15.

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Securities Disclosure: I, Pia Rivera, hold no direct investment interest in any company mentioned in this article.