Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Predictive Modeling Suggests US Stock Markets 12% Over Valued - 27th May 20
Why Stocks Bear Market Rallies Are So Tricky - 27th May 20
Precious Metals Hit Resistance - 27th May 20
Crude Oil Cuts Get Another Saudi Boost as Oil Demand Begins to Show Signs of Life - 27th May 20
Where the Markets are heading after COVID-19? - 27th May 20
Silver Springboards Higher – What’s Next? - 26th May 20
Stock Market Key Resistance Breakout Is Where the Rubber Meets the Road - 26th May 20
5 Ways To Amp Up Your CFD Trading Today - 26th May 20
The Anatomy of a Gold Stock Bull Market - 26th May 20
Stock Market Critical Price Level Could Soon Prompt A Big Move - 25th May 20
Will Powell Decouple Gold from the Stock Market? - 25th May 20
How Muslims Celebrated EID in Lockdown Britain 2020 - UK - 25th May 20
Stock Market Topping Behavior - 24th May 20
Fed Action Accelerates Boom-Bust Cycle; Not A Virus Crisis - 23rd May 20
Gold Silver Miners and Stocks (after a quick drop) Ready to Explode - 23rd May 20
3 Ways to Prepare Financially for Retirement - 23rd May 20
4 Essential Car Trade-In Tips To Get The Best Value - 23rd May 20
Budgie Heaven at Bird Land - 23rd May 20
China’s ‘Two Sessions’ herald Rebound of Economy - 22nd May 20
Signs Of Long Term Devaluation US Real Estate - 22nd May 20
Reading the Tea Leaves of Gold’s Upcoming Move - 22nd May 20
Gold, Silver, Mining Stocks Teeter On The Brink Of A Breakout - 21st May 20
Another Bank Bailout Under Cover of a Virus - 21st May 20
Do No Credit Check Loans Online Instant Approval Options Actually Exist? - 21st May 20
An Eye-Opening Perspective: Emerging Markets and Epidemics - 21st May 20
US Housing Market Covid-19 Crisis - 21st May 20
The Coronavirus Just Hit the “Fast-Forward” Button on These Three Industries - 21st May 20
AMD Zen 3 Ryzen 9 4950x Intel Destroying 24 core 48 thread Processor? - 21st May 20
Dow Stock Market Trend Analysis and Forecast - 20th May 20
The Credit Markets Gave Their Nod to the S&P 500 Upswing - 20th May 20
Where to get proper HGH treatment in USA - 20th May 20
Silver Is Ensured A Prosperous 2020 Thanks To The Fed - 20th May 20
It’s Not Only Palladium That You Better Listen To - 20th May 20
DJIA Stock Market Technical Trend Analysis - 19th May 20
US Real Estate Showing Signs Of Covid19 Collateral Damage - 19th May 20
Gold Stocks Fundamental Indicators - 19th May 20
Why This Wave is Usually a Market Downturn's Most Wicked - 19th May 20
Gold Mining Stocks Flip from Losses to 5x Leveraged Gains! - 19th May 20
Silver Price Begins To Accelerate Higher Faster Than Gold - 19th May 20
Gold Will Soar Soon; World Now Faces 'Monetary Armageddon' - 19th May 20
Gold Mining Stocks Fundamentals - 18th May 20
Why the Largest Cyberattack in History Will Happen Within Six Months - 18th May 20
New AMD Ryzen 4900x and 4950x Zen3 4th Gen Processors Clock Speed and Cores Specs - 18th May 20
Learn How to Play the Violin, Kids Activities and Learning During Lockdown - 18th May 20
The Great Economy Reopening Gamble - 17th May 20
Powell Sends a Message With Love for Gold - 17th May 20
An Economic Renaissance Emerges – Stock Market Look Out Below - 17th May 20
Learn more about the UK Casino Self-exclusion - 17th May 20
Will Stocks Lead the Way Lower for Gold Miners? - 15th May 20
Are Small-Cap Stocks (Russell 2k) Headed For A Double Dip? - 15th May 20
Coronavirus Will Wipe Out These Three Industries for Good - 15th May 20
Gold and Silver: As We Go from Deflation to Hyperinflation - 15th May 20

Market Oracle FREE Newsletter

Coronavirus-stocks-bear-market-2020-analysis

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

Commodities

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
BullionVault.com

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 http://www.MarketOracle.co.uk - 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

6 Critical Money Making Rules