Best of the Week
Most Popular
1.Crude Oil Price Trend Forecast 2016 Update - Nadeem_Walayat
2.Will Deutsche Bank Crash The Global Stock Market? - Clif_Droke
3.Gold Price In Excess Of $8000 While US Dollar Collapses - Hubert_Moolman
4.BrExit UK Economic Collapse Evaporates, GDP Forecasts for 2016 and 2017 - Nadeem_Walayat
5.Gold Stocks Massive Price Correction - Zeal_LLC
6.Stock Market Predicts Donald Trump Victory - Austin_Galt
7.Next Financial Crisis Will be Far Worse than 2008/09 - Chris_Vermeulen
8.The Gold To Housing Ratio As A Valuation Indicator - Dan_Amerman
9.GDXJ Gold Stocks - A Diamond in the Rough - Rambus_Chartology
10.Gold Boom! End Game Nears As Central Banks Buying Up Gold Mining Companies! - Jeff_Berwick
Last 7 days
Here’s Why You Should Be in Cash Right Now - 28th Sept 16
The Fed Put a 50% Tax on Your Retirement Plan - 28th Sept 16
Massive Chinese Debt And Why They Are On A Gold Buying Binge! - 28th Sept 16
Stocks Commodities and FX Markets Waiting Technically While Fundamental Data Neutral Poised - 28th Sept 16
This Commodity Has Perked Up its Investors' Portfolios - 27th Sept 16
Charting the Continuing Gold Market Correction - 27th Sept 16
Stock Market Crash and Recession Indicator Warning: Extreme Danger Ahead - 27th Sept 16
Financial Markets and FX Setups 27th Sept - 27th Sept 16
Crude Oil, Forex and Stock Market Trend Forecasts - 27th Sept 16
Why There is Trump - 27th Sept 16
Save Up to 70% in Shopping Expenses for Daily Items - 27th Sept 16
Gold’s Moving Averages and Long-Term Outlook - 26th Sept 16
September Stock Market - The Not So Silent Demise of Deutsche Bank - 26th Sept 16
SPX sell signal confirmed - 26th Sept 16
SPX is testing the next level of support - 26th Sept 16
Outrageously Entertaining US Presidential Campaign Final Stages - What Happens Next? - 26th Sept 16
BoJ, FOMC and Where To Now? - 26th Sept 16
Stock Market New All Time Highs Next - 26th Sept 16
Why Trump Will Win US General Election 2016 Prediction Forecast - 26th Sept 16
Martial Law Rolls Out Across the US As Jubilee Nears - 26th Sept 16
Stock Market More Correction Likely - 25th Sept 16
US Presidential Election Forecast 2016 - Trump Riding BrExit Wave into the White House - 25th Sept 16
US Economy GDP Growth Estimates in Free-Fall: FRBNY Nowcast 2.26% Q3, 1.22% Q4 - 24th Sept 16
Gold and Gold Stocks Corrective Action Continues Despite Dovish Federal Reserve - 24th Sept 16
Global Bonds: Why Our Analyst Says Things Just Got "Monumental" - 24th Sept 16
Where Did All the Money Go? - 23rd Sept 16
Pension Shortfalls Could Be 4X To 7X Greater Than Reported - 23rd Sept 16
Gold Unleashed by the Fed - 23rd Sept 16
Gold around U.S Presidential Elections - 23rd Sept 16
Here’s Why Eastern Europe Is Doomed - 23rd Sept 16
Nasdaq NDX 100 Big Cap Tech Breakout ? - 23rd Sept 16
The Implications of the Italian Banking Crisis Could Be Disastrous - 22nd Sept 16
TwinLakes Theme Park Summer Super 6 FREE Return Entry for Real? - 21st Sept 16
Has the Silver Bullet Run Out of Fire Power? - 21st Sept 16
Frack Sand: The Unsung Hero Of The OPEC Oil War - 21st Sept 16
What’s Happening With Gold? - 21st Sept 16
Gold vs. Stocks and Commodities, Pre-FOMC - 20th Sept 16
BrExit UK Inflation CPI, RPI Forecast 2016, 2017 - 20th Sept 16
European banks may be more important than the Fed this week - 20th Sept 16
Gold, Silver, Stocks and Bonds Grand Ascension or Great Collapse? - 20th Sept 16
Mass Psychology in Action; Instead of Selling Gilead it is Time to Take a Closer Look - 20th Sept 16
Hillary - Finally Well Deserved Recognition for Deplorables - 20th Sept 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

The Power of the Wave Principle

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.


© 2005-2016 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

Catching a Falling Financial Knife