Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21
China / US Stock Markets Divergence - 10th Oct 21
Can US Save Taiwan From China? Taiwan Strait Naval Battle - PLA vs 7th Fleet War Game Simulation - 10th Oct 21
Gold Price Outlook: The Inflation Chasm Between Europe and the US - 10th Oct 21
US Real Estate ETFs React To Rising Housing Market Mortgage Interest Rates - 10th Oct 21
US China War over Taiwan Simulation 2021, Invasion Forecast - Who Will Win? - 9th Oct 21
When Will the Fed Taper? - 9th Oct 21
Dancing with Ghouls and Ghosts at Alton Towers Scarefest 2021 - 9th Oct 21
Stock Market FOMO Going into Crash Season - 8th Oct 21
Scan Computers - Custom Build PC 6 Months Later, Reliability, Issues, Quality of Tech Support Review - 8th Oct 21
Gold and Silver: Your Financial Main Battle Tanks - 8th Oct 21
How to handle the “Twin Crises” Evergrande and Debt Ceiling Threatening Stocks - 8th Oct 21
Why a Peak in US Home Prices May Be Approaching - 8th Oct 21
Alton Towers Scarefest is BACK! Post Pandemic Frights Begin, What it's Like to Enter Scarefest 2021 - 8th Oct 21
AJ Bell vs II Interactive Investor - Which Platform is Best for Buying US FAANG Stocks UK Investing - 7th Oct 21
Gold: Evergrande Investors' Savior - 7th Oct 21
Here's What Really Sets Interest Rates (Not Central Banks) - 7th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold and Stocks Plunge, Dollar and Govt. Bonds Rally, Fed "Setting Up for More QE"

Commodities / Gold and Silver 2011 Sep 22, 2011 - 08:48 AM GMT

By: Ben_Traynor


Best Financial Markets Analysis ArticleU.S. DOLLAR gold prices dropped to $1739 an ounce Thursday lunchtime in London – a 4.1% fall in less than 24 hours – as stocks and commodities also fell heavily following Wednesday night's announcement by the US Federal Reserve.

Silver prices dropped to $37.22 an ounce – 8.4% off yesterday's high – while major government bonds and the US Dollar saw strong gains.

gold prices are "failing to find support from the kind of pessimistic headlines that have recently fuelled its bull run," notes one gold bullion dealer in London.

"There are significant downside risks to the economic outlook, including strains in global financial markets," the US Federal Reserve said Wednesday following the end of its latest Federal Open Market Committee meeting in Washington.

The Fed that it will buy $400 billion of longer-dated (6 to 30 years) US Treasury bonds – while selling shorter-dated bonds worth the same amount – in a widely-anticipated move dubbed Operation Twist.

The Fed will also reinvest proceeds from agency debt and agency mortgage-backed securities – meaning securities it bought from government-sponsored enterprises such as Fannie Mae and Freddie Mac – "to help support conditions in mortgage markets."

"The Fed may be setting us up for November, a move toward another, more aggressive quantitative easing," Tim Condon, Singapore-based head of Asia research at ING, told Bloomberg Television on Thursday.

Stock markets fell heavily on Thursday morning – with the FTSE down nearly 5% by lunchtime.
"While Operation Twist was well anticipated perhaps the severe warning from the Fed that 'there are significant downside risks to the economic outlook' was not," says Jane Foley, senior foreign exchange strategist at Rabobank.

"Monetary policy is reaching its limit," adds Manish Singh, head of investment at Crossbridge Capital in London, which manages assets worth over $2 billion.

"The outlook has not improved despite QE1 and QE2...fiscal measures have to do the heavy far [though], what we have got from the Congress is only disappointment and half- baked measures."

Elsewhere in Washington, the Republican-controlled House of Representatives on Wednesday voted against a bill designed to keep the US federal government funded beyond the end of this month.

Here in Europe, public transport workers in Greece went on strike Thursday in protest at deficit-cutting measures announced by the Greek government.

"We are obliged to resist...not even Greece's German and Turkish conquerors imposed such taxes," said Antonis Stamatopoulos, head of staff on the Athens subway.

Greece needs to convince the European Union, European Central Bank and International Monetary Fund that its austerity measures are on track in order to receive the next installment of last year's bailout – without which the Greek government expects to run out of money within weeks.

The problems in the Eurozone "threaten to reignite an adverse feedback loop between the banking system and the real economy," the IMF warned earlier this week, adding that some European banks may need more capital if they are to withstand an escalation of the crisis.

"We cannot rule out that some banks will need help from the state," EU financial services commissioner Michel Barnier added on Thursday.

Economic activity in the Eurozone is contracting this month, according to flash data published Thursday morning.

The provisional September Eurozone purchasing manager index for services fell to 49.1 – down from 51.5 for August (a figure below 50 indicates contraction).

Eurozone manufacturing PMI meantime fell to 48.4 – down from 49.0 last month.

Similar figures for Chinese manufacturing also indicate contraction – with provisional PMI figures from HSBC falling to 49.4 – down from August's 49.9.

"There is no doubt the risks of a global recession have grown," says Jeavon Lolay, head of global research at Lloyds Banking Group.

"Looking at gold," says David Wilson, director of metals research at Societe Generale, "you'd have thought that gold would be well supported given the European situation, the US situation and a slowing's really the Dollar rally that is not particularly helpful."

Dollar gold prices were down 4.2% for the week by Thursday lunchtime.

Euro and Sterling gold prices meantime were down 1.4% and 1.5% respectively – while gold in so-called commodity currencies Australian and Canadian Dollars was up for the week – 1% and 1.4% respectively.

By Ben Traynor

Gold price chart, no delay   |   Buy gold online at live prices

Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK's longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.

(c) BullionVault 2011

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in