Gold and silver ETFs took a hit today only two days after the price of gold bounced in response to the news that the Federal Reserve wouldn’t be tapering its bond-buying program. The dip came after James Bullard, the President of the Federal Reserve Bank of St. Louis, and a participant in the Federal Open Market Committee (FOMC), stated in an interview with Bloomberg Television that he believed the taper that was expected this month could come next month.
Gold price sharply down
News that the lack of a taper on Wednesday could only represent a stay of execution sent the price of gold down over 2.7 percent in early trading, flirting with $1,330 an ounce, on the belief that less stimulus could mean a stronger dollar. Silver also took a hit, with contracts for a December 13 delivery off almost 6 percent.
Gold and silver ETFs felt the sting, with heavily leveraged ETFs falling the most. Direxion Daily Gold Miners Bull 3X Shrs ($NUGT) was off over 14 percent, ProShares Ultra Silver (AGQ) dropped over 10.5 percent, and iShares Silver Trust ($SLV) lost over 5 percent. Precious metal mining stocks were also having a rough day, with Market Vectors Junior Gold Miners ($GDXJ) lost almost 7 percent by early afternoon and Global X Silver Miners ($SIL) plunged over 5.5 percent. The bears had their day, though. Direxion Daily Gold Miners Bear 3X Shrs ($DUST) showed gains of just under 15.5 percent, ProShares UltraShort Silver ($ZSL) popped almost 10.5 percent, and Deutsche Bank AG DB Gold Double Short ($DZZ) rose over 4.75 percent.
Bullard says taper was a "borderline decision"
Bullard’s interview with Bloomberg revealed that the highly anticipated decision announced Wednesday may have been very close to going to the other way, calling it a “borderline decision” that was made as “weaker data came in.” “The committee came down on the side of ‘let’s wait.’” Bullard said.
He also anticipated a “live meeting” in October, saying “it’s possible you could get some data that change the complexion of the outlook and could make the committee be comfortable with a small taper in October.”