GOLD PRICE ENDS THE WEEK MOVING UP
As the week began there was not much news that moved the cost of Gold. Metals prices reacted quietly after news broke that credit rating agency Standard & Poor’s raised the U.S. credit outlook from negative to stable. This announcement will likely create commotion in the market place as the U.S. has recently seen improved labor-market conditions, which could lead the Federal Reserve to cut back or discontinue further quantitative easing. “Any good news for the economy is not so good for Gold. The debate about when the Fed will taper or end stimulus continues to pressure,” Walter Hellwig of BB&T Wealth Management said. On Tuesday, the Gold price lowered as the effects of the Bank of Japan’s announcement that they will not extend their stimulus were felt. The BoJ’s decision may be the beginning of the end of the era of loose monetary policy. Gold has already suffered from talk coming out of the U.S. Federal Reserve as they consider when to end their monetary easing program. Marex Spectron's head of Precious Metals David Govett said, “The view is now that the Fed will taper quantitative easing. If that happens, it's negative for Gold. A lot of the rally Gold has had in the last three years has been down to QE.” Financial news out of Europe gave Gold a boost Wednesday when European equities rose and U.S. equities lowered. “Thinking about safe havens versus risk-on assets, in the short term Gold might be subdued as money goes into other asset classes,” Mitsubishi analyst Jonathan Butler said. However, ongoing signals for loose monetary policy in efforts to stimulate lagging global economies are expected to have a long-term bullish impact on Gold and other Precious Metals. Gold is up slightly headed into the weekend as prices continue to remain relatively range-bound. The current price pattern Gold is experiencing is largely due to a lack of clear-cut expectations regarding the Fed’s future plans for monetary easing. “The Fed meeting next week has kept a lot of people on the sidelines,” Afshin Nabavi, head of trading at MKS, said. “We may have some moves next week after the FOMC (meeting).” The validity of perpetuating quantitative easing (QE) measures that have been so essential to driving the price of Gold up since 2010 is now coming into question. There are factions among Federal Reserve officials who want to begin tapering the stimulus program and those who believe any discussion concerning a reduction in the level of stimulus is premature.
U.S. FEDERAL RESERVE CAUSING CONFUSION
One of the main reasons for the lack of movement in the Precious Metals market this week is due to the lack of direction given by the United States Federal Reserve. Next week the Fed will announce more details of their future plans concerning monetary easing. Investors will likely keep their eyes on central bank policies, specifically from the U.S. Federal Reserve. Matthew Sherwood, the Sydney-based head of investment market research at Perpetual Ltd., said, “There’s lots of confusion around the world at present about what central bank policy means for the outlook of the global economy, earnings and valuations. The Fed is likely to continue to be ambiguous about its next step, probably because it’s not sure. This will see markets continue to be volatile.” While there is a lack of facts being provided, plenty of speculation abounds. Portfolio manager Robert Spina of the Spina Group at Morgan Stanley Wealth Management shared his thoughts on how the Fed may approach continuing or winding down quantitative easing. Spina said, “I don't see them tapering until the fourth quarter, the economy is still on edge, but I do see them starting to taper.” On Thursday the Gold market, along with most other financial markets, was waiting on news from the U.S. Federal Reserve next week regarding their stimulus program. “The sentiment is still very divided over whether the Fed will taper or not,” Joyce Liu, an investment analyst at Phillip Futures in Singapore, said. “Due to the lack of major market-moving events, people are just trading on technicals until some senior Fed officials say something before the FOMC meeting next week,” she said, referring to the Federal Open Market Committee. The Gold price rose in early-morning trading on Friday after a late report by the Wall Street Journal Thursday suggested that the Federal Reserve isn’t ready to end quantitative easing (QE). The report states that Fed Chairman Ben Bernanke will say that QE tapering doesn’t necessarily mean the end of QE. The QE program was only part of the ultra-loose monetary policy enacted by the Fed, with near-zero interest rates also very supportive of the Gold price. AMP Capital’s Shane Oliver wrote, “The Fed will only start to slow and then unwind its stimulus programs when it’s completely comfortable that the economic recovery is self-sustaining. [Bernanke will also likely stress that] interest rate hikes are still a long way away.” Until the official meeting next Wednesday the markets will continue to be fueled by speculation.
At 4:45 pm (EDT), the APMEX precious metals spot prices were:
- Gold, $1391.50, Up $11.70.
- Silver, $22.11, Up $0.41.
- Platinum, $1446.00, Down $2.60.
- Palladium, $732.90, Up $1.90.
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