Lack of action from the Federal Reserve to use quantitative easing to stimulate the sluggish US economy has caused precious metals prices to plummet mid-year. Metals investors were hoping that the Federal Open Market Committee would institute another bout of quantitative easing as QEs 1 and 2 created immense profit opportunities in silver and gold.
Instead of QE3, the only action taken by the Fed was an extension of Operation Twist, a comparably gutless fiscal stimulative instrument. The sale of short term bonds to raise capital for long term bonds will essentially hold the line on US monetary policy. “Twisting” the yield curve is the purpose of the stimulus and the source of Operation Twist’s unique moniker.
Since its historic record high in September 2011, gold has lost nearly twenty percent. Silver has also encountered weakness as it approaches the $25 mark. Gold has broken through its $1,600 psychological barrier, while silver approaches its second roadblock.