Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
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
CISCO 2020 Dot com Bubble Stock vs 2021 Bubble Tech Stocks Warning Analysis - 6th Oct 21
Precious Metals Complex Searching for a Bottom - 6th Oct 21
FB, AMZN, NFLX, GOOG, AAPL and FANG+ '5 Waves' Speaks Volumes - 6th Oct 21
Budgies Flying Ability 10 Weeks After wings Clipped, Flight Feathers Cut Grow Back - 6th Oct 21
Why Silver Price Could Crash by 20%! - 5th Oct 21
Will China's Crackdown Send Bitcoin's Price Tumbling? - 5th Oct 21
Natural Gas News: Europe Lacks Supply, So It Turns to Asia - 5th Oct 21
Stock Market Correction: One More Spark to Light the Fire? - 5th Oct 21
Fractal Design Meshify S2, Best PC Case Review, Build Quality, Airflow etc. - 5th Oct 21
Chasing Value with Five More Biotech Stocks for the Long-run - 4th Oct 21
Gold’s Century - While stocks dominated headlines, gold quietly performed - 4th Oct 21
NASDAQ Stock Market Head-n-Shoulders Warns Of Market Weakness – Critical Topping Pattern - 4th Oct 21
US Dollar on plan, attended by the Gold/Silver ratio - 4th Oct 21
Aptorum Group - APM - High RIsk Biotech Stocks Buy, Sell, Hold Investing Analysis for the Long-run - 3rd Oct 21
US Close to Hitting the Debt Ceiling: Gold Doesn’t Care - 3rd Oct 21
Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
Original Oculus VR HeadSet Rift Dev Kit v1 Before Facebook Bought Oculus - 3rd Oct 21
Microsoft Stock Valuation 2021 vs 2000 Bubble - Buy Sell or Hold Invest Analysis - 1st Oct 21
How to profit off the Acquisition spree in Fintech Stocks - 1st Oct 21
�� Halloween 2021 TESCO Shopping Before the Next Big Panic Buying! �� - 1st Oct 2
The Guide to Building a Design Portfolio Online - 1st Oct 21
BioDelivery Sciences International - BDSI - High RIsk Biotech Stocks Buy, Sell, Hold Investing Analysis for the Long-run - 30th Sep 21
America’s Revolving-Door Politics Behind the Fall of US-Sino Ties - 30th Sep 21
Dovish to Hawkish Fed: Sounds Bearish for Gold - 30th Sep 21
Stock Market Gauntlet to the Fed - 30th Sep 21
Should you include ESG investments in your portfolio? - 30th Sep 21
Takeda - TAK - High RIsk Biotech Stocks Buy, Sell, Hold Investing Analysis for the Long-run - 29th Sep 21
Stock Market Wishing Away Inflation - 29th Sep 21
Why Workers Are NOT Returning to Work as Lockdown's End - Wage Slaves Rebellion - 29th Sep 21
UK Fuel PANIC! Fighting at the Petrol Pumps! As Lemmings Create a New Crisis - 29th Sep 21
Gold Could See Tapering as Soon as November! - 29th Sep 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

QE3 Triggers Higher Inflation Risks Gold Seen Hitting $1850-$1900

Commodities / Gold and Silver 2012 Sep 14, 2012 - 10:34 AM GMT

By: Ben_Traynor

Commodities

Best Financial Markets Analysis ArticleWHOLESALE MARKET gold bullion prices held above $1770 an ounce for most of Friday morning's London trading, near their six-month highs hit after the US Federal Reserve announced a third round of quantitative easing (QE3) yesterday, leading to warnings that the risk of inflation has risen.

"After the move [gold bullion] had, not just yesterday, but over the last two or three weeks I think it would be natural to look for a period of consolidation," says Credit Suisse analyst Tom Kendall in London.


"But certainly going into the back end of this year, I would be looking for gold to be getting towards at least the $1850 level."

Silver bullion traded around $34.70 an ounce this morning, also close to new six-month highs, as stocks, commodities and the Euro all moved higher after Fed policymakers voted 11-1 in favor of new asset purchases.

"Silver is poised to test the next resistance level at $35.4," one trader in Shanghai tells newswire Reuters. 

"The recent rally, which has lifted silver by about 25% over the past month, is suppressing short-term physical demand"

The Fed announced Thursday that it will purchase $40 billion of mortgage-backed securities per month, and will continue such purchases until the outlook for the labor market improves "substantially".

In addition, the Fed will continue its policy aimed at lowering longer-term US Treasury bond yields, known as Operation Twist, due to run until December. The Fed will also continue its policy of reinvesting principal payments on currently-held mortgage-backed securities back into this asset class.

In its statement, the Federal Open Market Committee said that the combined effect of its actions would amount to around $85 billion of asset purchases per month until the end of 2012.

"This is a Main Street policy, because what we're about here is trying to get jobs going," Fed chairman Ben Bernanke told a press conference following the announcement.

"We're trying to create more employment. We're trying to meet our maximum employment mandate, so that's the objective."

"[Bernanke will] fight and fight until he sees a real improvement in the economy," says Ethan Harris, New York-based co-head of global economics at Bank of America Merrill Lynch.

"He's not going to let his critics stop him. He believes quantitative easing can help the economy and the Fed can avoid inflation, so he'll just keep at it until there's a real turn in the economy."

The latest nonfarm payroll data suggest the US economy added 96,000 jobs in August, below the 150,000-200,000 Bernanke estimated in April is needed to meet Fed unemployment projections.

The US unemployment rate meantime has remained above 8% since February 2009.

"There is not a specific number we have in mind [for unemployment]," Bernanke told reporters.

"But what we've seen in the last six months isn't it."

In addition to announcing asset purchases, Fed policymakers extended their guidance for near-zero interest rates to at least mid-2015, beyond the previous guidance of late 2014.
US Treasury bond prices fell overnight for bonds with maturities of three years or more, pushing longer-dated yields higher.

"[The Fed's decision to leave] purchases open-ended and extending their guidance means a steeper yield curve, as there is more inflation risk," says Societe Generale trader Sean Murphy in New York.

"The need to come out with the operation at all is alerting everyone that there is a long road in this recovery and there are still many things that need to be addressed."

"Controlling the fire of inflation once it is roaring is a difficult task," warns Congressman Kevin Brady, a Republican from Texas and vice chair of the Joint Economic Committee.

"The Fed is overly confident about its ability to pick the right time to withdraw all this stimulus."
Economist Paul Krugman however says that it's "good to see the Fed moving, finally".

Writing in his New York Times column, Krugman adds that "the Fed seems to be trying to 'credibly promise to be irresponsible'" as a way of raising inflation expectations, something Krugman advocated the Bank of Japan do back in the 1990s.

"As [Bernanke] himself said," adds Neal Soss, chief economist at Credit Suisse and a former New York Fed economist, the Fed has built up a lot of capital with respect to inflation credibility...the point of having capital is, from time to time, to spend it."

"Should the Fed expand its balance sheet by a further $1.3 trillion," says Standard Bank strategist Walter de Wet, "it would lift our fair value estimate for gold to around $1900. As a result, even from current levels of gold at $1770, we still see substantial upside for the metal."

Here in Europe meantime, Spain would be "daft" to ask for a bailout on top of the €100 billion it has already agreed to fund banking sector restructuring, according to German finance minister Wolfgang Schaeuble.

"I'm not in the camp that says 'take the money,'" Schaeuble said in an interview Thursday.

"I'm one of those who says we should do everything possible to convince the markets that...speculation against Spain is without any basis in reality."

"Our desire and intention," said Spain's budget minister Cristobal Montoro yesterday, "is to return again to being a reliable partner in Europe that doesn't ask for anything."

On the currency markets, the Euro rallied above $1.31 against the Dollar for the first time since early May this morning. Despite this strengthening, Euro gold bullion prices set a record high at Friday morning's London Fix above €1359 per ounce, before drifting lower towards lunchtime.

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