The price of gold recovered overnight losses after the release of US Federal Reserve meeting notes in London trade Thursday morning, rising back to $1375 as major stock markets also rose with commodities.
While the Fed’s taper talk has been tapered and then un-tapered, the market may now be tapering the Fed rather than vice versa. Let’s assess Act 2 of the taper talk and the implications for the markets, including the dollar and gold.
Wholesale gold edged back from last week’s two-month closing high on Monday morning, recording its best London Gold Fix since 18th June above $1375 per ounce. World stock markets slipped, with Indonesia dropping 5.5%, as major government bond prices also fell, driving interest rates higher.
There is some evidence in the UK of a pick-up in consumer spending. There are two likely factors behind this, the first perhaps being seasonal, aided by the fine weather. The second is less obvious, but combines with the first to encourage purchases of big ticket items; and this is cheap consumer finance coupled with growing expectations of higher interest rates in the future.
In the short to medium term, the U.S. dollar and currencies are heavily influenced by the actions of the Fed. As the Fed may be reading tealeaves as much as anyone else, we may be facing particularly high policy uncertainty that, in turn, reflects on elevated volatility in the bond and currency markets. The good news is that this may yield opportunities for the prudent investor.
India has a history of gold ownership, spurred by long-term experience of a weak rupee. Only a fool leaves rupees on deposit, because they usually buy less and less every year. Alternative stores of value such as equities have been nowhere as good or certain as gold.
The price of wholesale gold fell back to $1320 per ounce Wednesday lunchtime in London as new data showed the US economy expanding faster-than-expected. Second quarter GDP rose 1.7% in real terms from a year earlier, the Bureau of Economic Analysis said.
Both silver and gold slipped in London on Friday morning, edging down to $1271 per ounce and $19.80 respectively. European equities pushed higher while the US Dollar rallied and major government bond prices rose.
The price of gold rose in Asia and jumped at the start of London trade Tuesday, hitting $1267 per ounce to recover 40% of last month’s crash before easing back. Prices for silver bullion also rose, but lagged gold’s rate of gain, before slipping back below last week’s finish at $19.69 per ounce.