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
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 Sinks to 3-Month Low as Fed "Distances Itself" from Further QE Stimulus

Commodities / Gold and Silver 2012 Apr 04, 2012 - 07:47 AM GMT

By: Ben_Traynor


Best Financial Markets Analysis ArticleTHE U.S. DOLLAR gold price hit its lowest level since early January on Wednesday morning, when it sank to $1622 an ounce ahead of US markets open.

Silver prices dropped to $31.76 an ounce – a fall of 1.7% for the week so far, but still just above last week's low.

Stocks and commodities also fell while the Dollar extended gains after yesterday's publication of the latest Federal Reserve policy meeting minutes.

On Tuesday, the gold price fell 2% in less than an hour following the publication of minutes from last month's Federal Open Market Committee meeting.

At the same time, the Dollar jumped 1% against the Euro, after the FOMC minutes appeared to suggest Fed policymakers are less inclined towards a third round of quantitative easing, with the Fed's staff economists revising their inflation forecasts upwards.

"I would have to see some pretty severe [economic] circumstances before I endorse for another round of quantitative easing," said Federal Reserve Bank of Atlanta president Dennis Lockhart, who is voting FOMC member this year, speaking on Wednesday.

"The outlook is positive enough that I am not sure I see the need for it.

"The Fed has distanced itself from QE3," says James Steel, chief commodity analyst at HSBC .
One FOMC member, Richmond Fed president Jeffrey Lacker, voted against last month's decision to leave the policy rate on hold between zero and 0.25%.

"In [Lacker's] view," say the minutes, "with inflation close to the Committee's objective of 2%, the economy expanding at a moderate pace, and downside risks somewhat diminished, the federal funds rate will most likely need to rise considerably sooner to prevent the emergence of inflationary pressures."

Gold has fallen sharply on other occasions this year following Fed policy communications. March 13, the day this latest FOMC decision was announced, saw the spot market gold price drop 2% from the day's high, while on February 29, gold fell nearly $100 an ounce after Fed chairman Ben Bernanke told Congress he saw potential inflationary pressures from rising gasoline prices.

The FOMC minutes are "in line with what Bernanke said in February" says HSBC's Steel.

"But nonetheless it's enough to reduce the near-term bullish momentum."

"Gold really does need the physical markets to step in right now," adds a note from Swiss investment bank UBS.

"So far the response has been limited. The jewelers' strike in India persists, overnight demand from that region was poor and the Chinese market is closed, but returning tomorrow."

"I wouldn't be surprised if we push lower towards $1600," says Standard Bank commodities strategist Walter de Wet.

"That is what we think is a floor and we are unlikely to fall substantially below that."

De Wet adds that real interest rates – the nominal rate minus inflation – are unlikely to turn positive in 2012.

"We still think globally that monetary supply will continue to grow...these things are positive for gold."

Here in Europe, the European Central Bank kept its policy rate on hold at 1% Wednesday.

Elsewhere in Europe, yields on benchmark 10-Year Spanish government bonds hit 3-month highs on Wednesday, after Spain failed to raise as much as hoped from a bond auction this morning – the first since the government unveiled its budget last week.

Yields on shorter-dated Spanish bonds have fallen significantly since December last year, when the ECB announced its three year longer term refinancing operations, at which European banks have since borrowed more than €1 trillion.

"It's clear the downtrend in yields on sovereign bonds was triggered by the LTROs," said Christian Schulz, a former economist at the ECB now with Germany's Berenberg Bank, speaking before the ECB's press conference on Wednesday.

"If the ECB were to say 'Well, actually now we're thinking about exiting this strategy', that would cause concern over whether these low interest rates are sustainable."

Over in China, the world's second-largest source of private demand for buying gold, the China Securities Regulatory Commission announced Tuesday that it is raising the limit on investment in Chinese markets by foreign fund managers from $30 billion to $80 billion.

Chinese authorities have also more than tripled the amount of Renminbi foreigners can raise in Hong Kong to invest on China's mainland, the Financial Times reports.

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 2012

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