Best of the Week
Most Popular
1.Gold Price Target of USD 2,300 - GoldCore
2.Greece Banking System Collapse Monday as ECB Pulls the Plug, Capital Controls Ahead of GrExit - Nadeem_Walayat
3.Why British Muslims Are Leaving Elysium Paradise for Syrian Hell - Nadeem_Walayat
4.Greece BANKRUPT! Financial and Economic Collapse to Follow IMF Debt Default - Nadeem_Walayat
5.Extreme Gold/Silver Shorting - Zeal_LLC
6.European Empire Strikes Back Against Greek Debt Fantasy, Counting Down to GREXIT - Nadeem_Walayat
7.Gold And Silver – Three Choices: Sell, Hold, Hold and Add. A Trading Treatise - Michael_Noonan
8.Gold and Silver Price Headed for Breakdown - Jordan_Roy_Byrne
9.Greece Crisis OXI - Raul_I_Meijer
10.Flatline Investing and Dead End Debt Schemes - Doug_Wakefield
Last 5 days
Forget Drachmas Greece Syriza Government Could Instruct Central Bank to Print Euros! - 2nd July 15
Greece Debt Crisis Trigger for Stock Market Crash or Bull Rally? Video - 1st July 15
Gold Stocks Break Below 2008 Low - 1st July 15
SPX Stock Market Retracement May be Over - 1st July 15
Silver Tunnel Vision 'Experts' - 1st July 15
Gold And Silver - Monthly, Quarterly Ending Analysis - 1st July 15
Europe’s Controlled Demolition - 1st July 15
The End of Dow 18,000; Bailouts No Longer Extended  - 1st July 15
Athens Mayor: Greek Government Should Resign - 1st July 15
China Stocks - This Is What a Bubble Looks Like - 30th June 15
Stocks Plunge on Greece Euro-Zone Financial Armageddon Blackmail - 30th June 15
Greece Crisis Shows Importance of Gold as Europeans Buy Coins and Bars - 30th June 15
Stock Investors Express Route to Profits in the Healthcare Sector - 30th June 15
Beyond the Greek Impasse - 30th June 15
Gold GDXJ : Impulse Move Pending - 30th June 15
Fed Interest Rate Increase Could Be Best Thing to Happen to Gold - 30th June 15
Marc Faber - Greece is Basically Bankrupt - 30th June 15
Greece - Shoot the Dog and Sell the Farm - 29th June 15
Grexit?, BIS Warning, Chinese Market Crash & Systemic Risk Shake the Global Economy - 29th June 15
The New "Sharing Economy" May Not Be the Profit Bonanza Everyone's Expecting - 29th June 15
Gold and Silver Greece and Short Positions - 29th June 15
Volatility and Sleep-Walking Markets - 29th June 15
Greece BANKRUPT! Financial and Economic Collapse to Follow IMF Debt Default - 29th June 15
Stock Market More Decline Ahead? - 29th June 15
China Stock Market Crackup - The Final Trap Looms... - 29th June 15
Greece Banking System Collapse Monday as ECB Pulls the Plug, Capital Controls Ahead of GrExit - 28th June 15
Investor Stock Play for Two Growing Missile Threats - 28th June 15
Stock Market Uptrend/downtrend Inflection Point - 27th June 15
Greece Crisis OXI - 27th June 15
Gold And Silver – Three Choices: Sell, Hold, Hold and Add. A Trading Treatise - 27th June 15
It’s Time to Change the Way You Look at Disney Forever - 27th June 15
Flatline Investing and Dead End Debt Schemes - 27th June 15
Stock Market Investors Avoid the "Herd" Like the Plague - 26th June 15
Extreme Gold/Silver Shorting - 26th June 15
USD Daily, Weekly, Monthly & Conclusions - 26th June 15
Gold Price Target of USD 2,300 - 26th June 15
Gold and Silver - Another Successful Option Expiration For the Insiders - 26th June 15
Why Buffett Bet A Billion On Solar Energy - 26th June 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

China Stocks - Where are they going?

Gold Falls Following "Bernanke Curve Ball" as US "Lacks Credible Fiscal Plan"

Commodities / Gold and Silver 2012 Jun 08, 2012 - 11:36 AM GMT

By: Ben_Traynor

Commodities

Best Financial Markets Analysis ArticleWHOLESALE MARKET prices for gold bullion hit a low of $1561 an ounce during Friday's Asian session – 4.8% down on this week's high – while stocks and commodities also fell this morning and major government bond prices gained.

On the currency markets, the Euro dropped back below $1.25 as the Dollar rallied, after Federal Reserve chairman Ben Bernanke yesterday "disappointed" traders by not making a firm commitment to a third round of quantitative easing, known as QE3.


Gold prices managed to recover some ground by Friday lunchtime in London, rising back above $1580 an ounce, but gold bullion was still down 2.5% on the week, having unwound most of last Friday's jump.

Silver bullion meantime dipped below $28 an ounce in early London trading, before it too recovered some ground, adding about 50 cents ahead of the US session.

"Gold bulls were very disappointed by the Bernanke testimony yesterday," says Lynette Tan, investment analyst at Phillip Futures in Singapore.

"Bernanke gave few clues on QE3," adds the latest note from Swiss precious metals group MKS, "and attributed much of the recent job weakness to seasonal factors."

"This morning, we are seeing some support for [precious metals] despite a persistently strong Dollar," says Marc Ground, commodities strategist at Standard Bank.

"This support is most likely coming from the physical market as buyers find current price levels once again more attractive...however, we would not completely discount another leg down."

At his testimony to the Joint Economic Committee on Thursday, Bernanke warned Congress that current US fiscal policy is "clearly unsustainable". The Fed chairman added that the so-called fiscal cliff – the expiration of tax cuts and reduced government spending currently due to happen at the start of 2013 – poses "a significant threat to the recovery".

A day earlier, European Central Bank president Mario Draghi also drew attention to fiscal policy issues, saying on Wednesday that "some of [Europe's] problems have nothing to do with monetary policy...[which should not be used] to compensate for other institutions' lack of action."

Europe "poses significant risks to the US financial system", Bernanke said yesterday.

"The Federal Reserve remains prepared to take action as needed to protect the US financial system and economy in the event that financial stresses escalate," he added. Later in his testimony, Bernanke argued there is "no justification" for fears that QE poses a risk of high inflation.

"[Bernanke is] saying what he has said before," reckons Fabian Eliasson, New York-based vice president of currency sales at Mizuho Corporate Bank.

"[He is] reassuring people that they will act if things deteriorate further."

A day before Bernanke's testimony, Fed vice chair Janet Yellen told an event in Boston she was "convinced that scope remains for [the Fed] to provide further policy accommodation either through its forward guidance or through additional balance-sheet actions".

"Bernanke threw traders a curve ball," complained one Chicago analyst following the Fed chairman's testimony.

"After his vice chair made it seem like [QE] was a foregone conclusion, he really messed people up."

Despite its rhetoric, the Fed is actually tightening policy, argues Grant's Interest Rate Observer publisher Jim Grant. In an interview with CNBC this week, Grant pointed out that the Fed's balance sheet has contracted over the last three months.

"The Fed is withdrawing stimulus even as more and more [Fed policymakers] are talking about QE3," said Grant, who nevertheless says he expects there will be a third round of quantitative easing.

Here in Europe meantime, Spain is due to ask the European Union to inject funds into its banking sector, according to a Reuters report which cites EU and German officials.

"The government of Spain has realized the seriousness of their problem," the newswire quotes a senior German official.

Spanish banks hold €184 billion in real estate loans described as "problematic" by the Economy Ministry, news agency Bloomberg reports.

Ratings agency Fitch downgraded Spain's sovereign credit rating from A to BBB Thursday, putting it two notches above junk.

Fitch also warned Thursday that it will cut its rating for the US next year if it does sufficiently address its fiscal problems.

"The United States is the only [AAA-rated] country which does not have a credible fiscal consolidation plan," said Fitch sovereign ratings analyst Ed Parker.

China, the world's biggest buyer of gold bullion in the six months to March, is due to publish several pieces of key economic data this weekend, including the latest consumer price inflation, money supply and trade figures.

China's central bank cut interest rates yesterday for the first time since early 2009, a move that surprised many analysts.

"This rate cut is a clear indication the government sees further weakness in the May economic data," reckons Stephen Green, head of research, Greater China at Standard Chartered in Hong Kong.

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.


© 2005-2015 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

Biggest Debt Bomb in History