Commodity prices and mining stocks are going wild Thursday morning after the US Federal Reserve struck a dovish tone at its March meeting on Wednesday evening.
The US central bank left its benchmark interest rate unchanged at 0.25% to 0.50%, and it cut the number of rate hikes it expects to undertake in 2016 from four to two.
That sent the dollar sharply downward, which in turn has given the price of raw materials across the globe a big boost. That rally has also helped to spark a jump in mining stocks in European trading.
Virtually every commodity was trading in positive territory early on Thursday afternoon, with precious metals leading the way and oil also popping.
Gold's huge rally in 2016, which has seen it gain 18% in value since January, has continued, despite increased stability in financial markets in the past few weeks. On Thursday it has gained more than 3%, trading at $1,267.7 an ounce. Gold initially rallied at the start of the year thanks to crazy volatility in the markets, which sent investors flooding to the "safe haven" metal, but it has kept going upward even since things quietened down. Here's how gold's surge Thursday looks:
Thursday's jump in the gold price has also helped lift the price of silver and PGMs — platinum group metals — higher. Just after 12:15 p.m. GMT (8:15 a.m. ET), silver has gained 3.13%, while platinum is up by 2.62%. HSBC's daily note on precious metals argues that the rally isn't likely to be short-lived. Here's the bank (emphasis ours):
The PGMs and silver are often influenced by gold and their respective rallies today are largely a function of higher gold prices. But we also believe silver and the PGMs have compelling underlying fundamentals that argue for higher prices. Silver has not kept up with gold and may benefit from greater coin and bar demand, as buyers could shift from gold products. Platinum and palladium are running production/consumption deficits and auto demand, the main demand source for both metals, is still buoyant. This leaves us comfortable with their respective rallies.
Oil is also having a bumper day, with both major benchmarks seeing big gains — as much as 3% — early Thursday morning before paring some of that increase. Brent crude, the European benchmark, is up by 0.8% to $40.65, while West Texas Intermediate has gained 1.17%, and it is now trading at $38.88.
The commodity rally on Thursday morning has given a huge boost to commodity stocks trading in Europe, and particularly those on the FTSE 100. An hour into trading, all of the FTSE's biggest winners are resources-based firms, with Anglo American topping the pile, gaining nearly 10%. Anglo shares are up more than 140% since hitting an all-time low in January. Randgold Resources, the biggest gold miner listed on the FTSE, has popped 6.15%. Here's the scoreboard:
