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While Fed Says ‘No’, Gold Says ‘Yes’

Published 09/19/2013, 10:56 AM
Updated 05/14/2017, 06:45 AM
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Just as the readers and clients of The Real Asset Company predicted, the FOMC decided not to taper QE. In response to this ‘surprise’ from Bernanke, the spot gold price jumped 4.2%.

The price of silver felt the biggest benefit of the markets being taken by surprise, jumping by 6.5%. Yesterday was its biggest daily rally since November 2008.

According to data compiled by Bloomberg gold futures trading on COMEX had its best day since March 2009.

Both gold and silver’s gains outpaced those of other markets. The 1% drop in the dollar went someway to underpinning the gold price

In a 9:1 vote the Committee refrained from tapering QE, citing tight fiscal policy and a rise in mortgage rates as its reasons for doing so.

Cold Tapering Come Later?

Bernanke did not rule out tapering this year but once again directed attentions towards the US economic environment and ‘confirming evidence.’ The lack of tapering action from the Fed will be noted by other central banks, namely the Bank of England, who are no doubt looking to the US as a benchmark.

Goldman Sachs Group said the FOMC’s decision “leaves risks to gold prices as skewed to the upside in the near-term.” However it stands by its prediction that prices will continue to drop into 2014 on U.S. economic growth and less accommodative monetary policy. This follows Monday’s certainty from the bank that gold was over, as tapering was guaranteed to happen.

It is interesting that comments coming from hedge funds and banks attribute gold’s response to QE is because ‘now’ easy monetary policy will continue. This is despite the fact we all knew it would continue with or without tapering.

Tapering is still expected to go ahead in the near future, to read about its impact on the price of gold bullion and gold investment read our research here.

Who Got The Heads Up?

As reported by Zerohedge yesterday, just three minutes before the FOMC’s statement was released ‘gold spot and futures prices began to rise notably…In those 3 minutes Gold prices jumped $11… so the question is – lucky guess… or which big bullion bank got the nod?’ Could it be that word slipped out and the biggest participants in the market started to buy gold to front run the impending market flows?

What’s Next For Gold?

The next bugbear for gold and silver speculators will be the upcoming debate over the debt ceiling. Should the debate over the issue be a lengthy one then there is a risk of the US’s credit rating being downgraded.

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