The price of gold fell 3.2% in less than an hour yesterday as Federal Reserve Chairman, Ben Bernanke, gave testimony in front of the House Committee in Washington.
Bernanke stated that, “The unemployment rate remains elevated, long-term unemployment is still near record levels, and the number of persons working part time for economic reasons is very high.” He went on to say that the Federal Open Market Committee (FOMC) “expects economic conditions to warrant exceptionally low levels of the federal funds rate to at least late 2014”, however his dovish comments on interest rates were not accompanied by any mention of an additional monetary boost.
The fact that Bernanke made no mention of further QE sent the US Dollar higher and the metals, including, gold, silver, copper, platinum, and palladium sharply lower. Interestingly however, the price of gold in Euros actually rose and the yellow metal remains near its all-time highs in Euro’s, Japanese yen and Swiss francs.
Right now the US Dollar is benefiting from the fact that the US is the best looking house in a bad neighbourhood. However I don’t believe that the economic recovery is self-sustaining, and in my opinion it’s only a matter of time before we do see more large-scale bond purchases from the Fed.