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.
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.
Wholesale gold rallied from a drop to $1310 per ounce Thursday lunchtime in London, gaining as world stock markets also cut earlier losses. Trading back above $1322 – a two-year low when hit by April’s gold crash – spot bullion also rallied 1.0% for Euro and Sterling investors.
The propaganda has turned laughable. On the popular financial news networks, the recent decline in gold has prompted quite the parade of clowns on the ship of fools to trumpet nonsense. The widely published and posted gold price is dominated by futures contracts, and thus is corrupted and meaningless.
U.S. dollar gold prices climbed to $1584 an ounce Tuesday morning, 1.2% above last week’s low, as stocks and commodities also edged higher and the Dollar weakened slightly after another Federal Reserve policymaker spoke in favor of ongoing quantitative easing.
U.S. dollar gold prices fell slightly in Wednesday morning’s London trading, after Federal Reserve chairman Ben Bernanke told Congress that that Fed’s ongoing quantitative easing policy “is providing important support to the recovery” and that the benefits “are clear”.
During 2013 we expect the Federal Reserve to alter its stance on monetary policy such that they can keep interest rates ultra-low until the unemployment reaches 6.5%. We also expect them to expand their quantitative easing programme to at least $85 billion a month.
Uncertainty over the US election and now the Fiscal Cliff has caused investors to flee the equity markets and go into “risk off” mode. As a result many are asking whether the recent selloff in US stocks is the beginning of a new bear market.
QE1, QE2 and Operation Twist caused the US stock market to rise by an average of 20.2%. However in the wake of QE3 the S&P has fallen by 1.7%. The question is, has the magic of QE finally faded and should investors take defensive action? This article examines the facts.
We have long held the view that western politicians will do whatever it takes to avoid short-term pain, even if doing so leads to much greater pain at some point in the future. And that is where the global economy is today.
In this two part article, John Butler tackles the subject of currency debasement. As John points out, “Yes, this [currency debasement] may clearly and directly rob savers to bail-out borrowers, but if other methods fail, then devaluation will ensure a de-leveraging of the economy.”