Gold Drops On Bernanke Speculation

The week (after a UK Bank Holiday) has finally arrived. It seems that with Jackson Hole at the end of the week the countdown is finally on to whether we will see further news of QE. We saw 4-month highs for both gold and silver last week, but both seem to have retreated slightly during early futures trading as investors wait for yet more clarity from central bankers in regard to QE.

Many believe Bernanke’s Jackson Hole speech will do little to offer further stimulus and as a result many are taking a "wait and see approach." This last month or so seems to have caused many to lose focus as to what drives the gold price and why people choose to invest in gold bullion.

At present analysts believe the hope for QE is keeping gold supported at the $1,650 level, despite it being unclear exactly what will happen. There is little question that both the gold and silver price have received a boost as we all wait for the coming weeks’ announcements. However some analysts believe that this has been a technical breakout which is backed by other fundamental reasons which hold far more ground in the precious metals’ history.

It is worth considering the last few months of the year as we head towards wedding seasons and religious festivals in the world’s biggest gold markets. This will once again remind everyone that bankers do not have the power to outbid the money of the people. Both gold and silver have been in consolidation for the majority of the summer months, this provides them both with strong bases on which to climb further. Considering the current rally is thanks to a few empty words from central bankers the possibilities for them both to head much higher are clear.

If stimulus fails to appear from either the Federal Reserve, the PBC or the ECB then there may well be a sharp contraction in the gold price. But looking at the figures and the data releases for the following week then this is unlikely to occur, in my opinion.

Even if it all three major central banks disappoint the markets, they will still fail to eliminate the risks presented both in the financial system and the on-going loose monetary policies never mind the geopolitical issues. This discussion about QE is not just a one off because of a small problem, it is the result of decades of monetary abuse and inflationary policies. One disappointing announcement will not remove the need to protect your money from the asbestos ridden system governments have built.