Best of the Week
Most Popular
1.Stock Market Continues Defying Gravity, Dow New All Time High - Nadeem_Walayat
2.America Superpower 2016 - Ian Bremmer
3.The US Dollar and the Precious Metals Complex - Rambus_Chartology
4.UK Immigration Crisis Could Prompt BREXIT, Propelling Britain Out of EU Despite German Factor - Nadeem_Walayat
5.The “Real Flash Crash” Will Scare You to Death - Shah Gilani
6.Gold Price Trend Forecast - Bob_Louka
7.UK Deflation Warning - Bank of England Economic Propaganda to Print and Inflate Debt - Nadeem_Walayat
8.Gold Lifeboat to Global Economies “Titanic Problem” Warn HSBC - GoldCore
9.Will Interest Rates Ever Rise? - BATR
10.Who’s Killing the Stock Market? - Shah Gilani
Last 5 days
Stock Markets Buy and Hold is Back! - 28th May 15
We're Now Frighteningly Vulnerable to a Bond Market Crash - 28th May 15
Austerity, Economics and Religion - 28th May 15
National Holidays London and the Magic of Legoland UK Review - 27th May 15
Imminent Stocks Bear Market Signaled by Dow Theory ... - 27th May 15
Gold Price Has Bottomed – More Evidence - 27th May 15
Three Reasons You Shouldn’t Try to Invest Like Warren Buffett - 27th May 15
Gold Is “100% Guarantee from Legal and Political Risks” States Russian Central Bank - 27th May 15
Don't Drown in the Sea of Global Debt - 27th May 15
Three Reasons Why Carl Icahn Is Wrong About Apple Stock - 27th May 15
Crude Oil Price Stochastic Signals - 26th May 15
Why the Stock Market Will Crash - 26th May 15
GDP, Inflation, Employment Economic Statistics: It’s All a Lie - 26th May 15
Introduction to Peak Food - 26th May 15
Should We Dump the Euro? - 26th May 15
A Geopolitical Net Assessment of Europe - 26th May 15
Stock Market Top in Place? - 26th May 15
Best Cash ISA SBI 2.3% - 2.8 Year Fix, UK Interest Rates 2016 - 26th May 15
China Sets Up Gold Bullion Fund For Central Banks - 25th May 15
Is The Silver Trade Getting Crowded? - 25th May 15
Money Murder Mystery: Who Killed the Stock Market? - 25th May 15
Why Do We Celebrate Rising U.S. House Prices? - 24th May 15
Mario Draghi’s Slippery Downward Slope - 24th May 15
Gold : Truth is Stranger than Fiction - 24th May 15
Facebook Stock Price Forecast - 24th May 15
Make a Killing on the Coming Energy "Debt Bubble" - 24th May 15
Stock Market SPX Uptrend Inflection Point - 23rd May 15
What You Know for Certain - Huge Demand for Gold And Silver - 23rd May 15
Are We in Another Credit Bubble? And Is It Different than Before? - 23rd May 15
The “Real Flash Crash” Will Scare You to Death - 23rd May 15
Venezuela: No Rule of Law, Bad Money - 23rd May 15
Robots That Can Beat the Market by 100% - 23rd May 15
Why Shake Shack Stock Is a Bad Investment - 23rd May 15
Gold Price Primary Driver Bullish - 23rd May 15
Time To Get Real About China - 22nd May 15
Gold Lifeboat to Global Economies “Titanic Problem” Warn HSBC - 22nd May 15
One Investment Could Save Two Generations' Retirements - 22nd May 15
Investing is About Identifying Gifted and Talented Camps - 22nd May 15
One of Europe's Latest Debt Nightmares - 22nd May 15
UK Immigration Crisis Could Prompt BREXIT, Propelling Britain Out of EU Despite German Factor - 22nd May 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Biggest Debt Bomb in History

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