Gold and silver pounded by inflation fears, strong greenback

New York (Jan 27)  Gold and silverfutures prices are sharply lower in midday U.S. trading Thursday. The precious metals are getting hammered following a more-hawkish-than-expected Federal Reserve meeting and some upbeat U.S. economic data—both of which have helped push the U.S. dollar index to a 1.5-year high today. February gold futures were last down $36.10 at $1,793.50 and March Comex silver was last down $1.142 at $22.655 an ounce.

I've been involved in the markets full-time for almost 40 years. I've this this many times before: Traders are fickle, especially on a short-term markets basis. The gold and silver markets are selling off sharply recently due to a tighter Federal Reserve (and other central banks') monetary policies, after having been boosted by looser monetary policies for several years. Yet, the tighter monetary policies are being implemented mainly due to rising inflation fears. Historically, rising inflation has been bullish for hard assets like precious metals. My bias is that as inflation continues to bite, gold and silver markets will respond, overall, in a longer-term bullish fashion.

Today's U.S. four-quarter gross domestic product report showed a rise of 6.9% versus expectations for a rise of 5.5%. The closely watched inflation indicator, the personal consumption expenditures (PCE) index, came in at a hot 6.5% annual rate in the fourth quarter. U.S. weekly jobless claims data was also upbeat. The data helped to rally the U.S. dollar index, which helped to push the gold and silver markets lower.

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