(ABX) (TGD) (SLW) | Precious Metals Stocks Take A Dive On FOMC News

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Barrick Gold Corp (NASDAQ: ABX) | Timmins Gold Corp (NYSEMKT: TGD) | Silver Wheaton Corp. (USA) (NYSE: SLW)

Today is starting out to be a rough day on Barrick Gold, Timmins Gold, Silver Wheaton, and others in the precious metals industry. However, the declines we’re seeing today are for a very good reason. Early this morning, the Federal Reserve released the meeting minutes from the July FOMC meeting. In the release, the central bank took a very hawkish tone, leading to rate hike expectations. Today, we’ll talk about the meeting minutes, how precious metals stocks reacted to the news, and what we can expect to see from ABX, TGD, and SLW ahead.

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ABX, TGD, And SLW See Losses Following FOMC Meeting Minutes

As mentioned above, today is shaping up to be a rough one for Barrick Gold, Timmins Gold, Silver Wheaton, and others in the precious metals industry. The declines we’re seeing have a lot to do with the Federal Reserve’s FOMC meeting minutes that were recently released. In the document released, the Federal Reserve seems to be taking a surprisingly hawkish approach. As a result, investors are expecting that a rate hike is just around the corner. In the release, the FOMC offered the following statement, which fueled bearish activity surrounding precious metals stocks:

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market indicators will strengthen. Inflation is expected to remain low in the near term, in part because of earlier declines in energy prices, but to rise to 2 percent over the medium term as the transitory effects of past declines in energy and import prices dissipate and the labor market strengthens further. Near-term risks to the economic outlook have diminished. The Committee continues to closely monitor inflation indicators and global economic and financial developments.”

What This Has To Do With Precious Metals Stocks

As mentioned above, this news is taking a toll on ABX, TGD and SLW. What is it about this news that has such a profound affect on precious metals stocks? The answer is simple. These stocks derive their money from the precious metals market. Therefore, when precious metals are down in value, profits decline. When precious metals are up in value, profits grow.

The news from the FOMC is bad news because a higher interest rate could hurt the values of gold and silver. After all, these commodities are priced using the USD and an increased interest rate would increase the value of the USD. As a result, we’d see declines in demand, sending precious metals downward. With the new hawkish view from the Federal Reserve, it seems like a rate hike could be just around the corner. This could mean pain for ABX, TGD and SLW.

How Precious Metals Stocks Reacted To The News

As investors, one of the first things that we learn is that the news moves the market. Any time positive news is released, we can expect to see gains. However, today’s news wasn’t good for the precious metals market. As a result, we’re seeing declines across the board. Here’s what we’ve seen so far (11:56) from Barrick Gold, Timmins Gold, and Silver Wheaton:

  • ABX – Currently trading at $20.49 per share after a loss of $0.83 per share (3.89%).
  • TGD – Currently trading at $0.52 per share after a loss of $0.03 per share (5.38%).
  • SLW – Currently trading at $29.69 per share after a loss of $1.19 per share (3.85%).

What We Can Expect To See From Precious Metals Stocks Ahead

Moving forward, I have a relatively mixed opinion with regard to ABX, TGD and SLW. At the end of the day, the fact that the Fed will likely raise its rate soon is bad news for precious metals. As a result, this will likely turn into a bump in the road. However, in the long run, I maintain my bullish opinion on Barrick Gold, Timmins Gold, and Silver Wheaton. At the moment, global economic conditions remain concerning. As a result, I’m expecting safe haven demand to continue growing, at least throughout the rest of this year.

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What Do You Think?

Where do you think ABX, TGD, and SLW are headed? Join the discussion at TalkTRENDZ!

[Image Courtesy of Flickr]

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