TODAY’S PRICE DROP A SMALL HICCUP FOR LONG-TERM BULLISH GOLD MARKET
Strong domestic housing data cooled Gold’s two session rally as today’s dip has pulled the metal back below $1,600 an ounce. Tuesday’s Gold boost was propelled by Italian election results ending in an impasse and Federal Reserve Chairman Ben Bernanke’s announcing a continued commitment to monthly asset purchases until the U.S. economy is markedly improved. Though today’s price drop seemed to prematurely stall the momentum investors had hoped for following Bernanke’s remarks, many believe stimulus efforts by the Fed are bullish for Gold long-term. Jeffrey Wright, managing director at Global Hunter Securities, claimed Bernanke’s statement is “very supportive for Gold in 2013 and beyond. Further QE measures by the [Federal Open Market Committee], such as purchasing of assets ... are funded by the expansion of the Fed’s balance sheet. Over time, this degrades the value of the U.S. dollar compared with other currencies and can lead to inflation in the economy. Gold as a U.S. dollar-denominated commodity appreciates with a lower U.S. dollar and is viewed as a hedge against inflation.”
As Gold faltered today, equities markets have continued their climb, with the Dow Jones Industrial Average reaching its highest level in five years. Stocks and Precious Metals markets have both benefited from the Federal Reserve’s loose monetary policy recently, but the Dow and S&P 500 are, for the time being, having more success maintaining their forward motion. However, the printing of “new money” for the purposes of bond-buying is expected to take its toll on the U.S. dollar. There is currently no plan in place for a method of ending government stimulus. Bernanke stated Tuesday that, “We haven’t done a new review of the exit strategy yet. I think we will have to do that sometime soon.” As long as the Fed’s monthly asset purchases continue, the subsequent weakening of the U.S. dollar is expected to be bullish for Gold.
At 5:00 pm (EST), the APMEX precious metals spot prices were:
- Gold, $1598.00, Down $19.10.
- Silver, $29.03, Down $0.31.
- Platinum, $1599.70, Down $17.80.
- Palladium, $744.30, Up $3.40.
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