Precious metals enjoy boost from dovish Federal Open Market Committee

Precious metals enjoy boost from dovish Federal Open Market Committee
Updated 22 March 2015
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Precious metals enjoy boost from dovish Federal Open Market Committee

Precious metals enjoy boost from dovish Federal Open Market Committee

The Federal Open Market Committee meeting on Wednesday was the highlight of this week. A lot of attention is currently being given to the US Federal Reserve as speculation about when and by how much it will raise its official Fed Funds rates. The statement by Fed chair Janet Yellen left the door open for a rate hike in September but at the same time the committee turned more dovish on how much rates need to rise, according to a report prepared by Ole Sloth Hansen, head of commodity strategy at Saxo Bank.
A sharply higher dollar against most other currencies, a subdued inflation outlook combined with a recent host of weaker-than-expected economic data provided the ammunition for the change in tone. The result was a big risk-on move into stocks and bonds, while the dollar experienced a couple of hours of turmoil, especially EURUSD, which had its second most volatile day ever. 
A weaker dollar and falling bond yields returned some support to precious metals, with gold and silver enjoying the first positive week in three. Soft commodities were the best performing sector, with Arabica coffee and cotton both jumping higher as the dollar triggered short covering.
Industrial metals were higher as copper moved back to the top of its current $2.6 to $2.7 range as the world's second largest mine in Indonesia remained shut for a fifth day due to strike action.
The grain sector failed to benefit from the weaker dollar as the attention among traders, farmers and consumers is increasingly turning towards a key report on March 31. Each year the agriculture industry eagerly awaits the USDA's Prospective Planting report, which provides the first survey-based (82,000 farmers) estimates of US farmers planting intentions for the coming year.

Gold and silver
Gold and especially silver staged a comeback following the Federal Open Market Committee meeting on Wednesday. Although a rate hike is still on the cards, Fed chair Janet Yellen seems to have joined the ever increasing crowd of central bank doves across the world.
A subdued inflation outlook, a rising dollar and recent weakness in economic data may sway the Fed from going too aggressive on rates. and this was music to the ears of gold bulls.
Gold rose for the first time in three weeks after, just like in November and December, having struggled to make it much below the $1,145/oz to $1,150/oz area of support.