Gold Falls Despite Fed’s QE4 and Reckless Policies - ZIRP Now Tied To Unemployment

   on December 13 2012 8:25 AM
Swiss Gold
A China Gold Tael (37.5 gram) along with other one-ounce gold coins are displayed in this illustration photo in Hong Kong June 20, 2012. Credit: Reuters/Bobby Yip

Today’s AM fix was USD 1,694.75, EUR 1,299.16 and GBP 1,051.46 per ounce. Yesterday’s AM fix was USD 1,712.50, EUR 1,315.59 and GBP 1,061.69 per ounce.

Silver is trading at $32.81/oz, €25.22/oz and £20.42/oz. Platinum is trading at $1,619.00/oz, palladium at $678.00/oz and rhodium at $1,060/oz.

Platinum is trading at $1,619.00/oz, palladium at $678.00/oz and rhodium at $1,060/oz.Gold was up $1.30 or 0.08% in New York yesterday and closed at $1,711.30/oz. Silver rose $0.43 to $33.38 before it fell back near unchanged in late morning trade, but then it surged to as high $33.78 in afternoon trade and finished with a gain of 1.43%.

Gold Chart by Tick, Dec. 7-13 – (Bloomberg)

Gold fell nearly 1% in illiquid markets in Asia overnight. Some traders may have decided to take profits on the short term long the FOMC announcement trade. Gold bullion prices had already ran up to $1,723 in the 2 weeks prior to the policy statement.

Overnight, as prices fell below the 100-day moving average at $1,705, stop-loss selling was triggered which pushed prices lower quickly.

Yesterday, the Federal Reserve took the bold, some would say reckless step, of linking its monetary policy to unemployment, creating concerns that the U.S. dollar will be debased even more in the coming months. 

The US Federal Reserve will keep interest rates at close to zero until unemployment falls below 6.5%. This is a historic and very radical change to monetary policy. It is the first time a large central bank has ever tied its interest rate policy directly to one facet of the economy – unemployment.

The Fed said that it will maintain ultra loose monetary policies for the foreseeable future and the Fed will in effect double the pace of dollar creation.

The Fed announced it plans to buy $45 billion per month in longer-term Treasuries in addition to the $40 billion per month in mortgage-backed securities, as expected. 

With the unemployment rate at 7.7 per cent in November, the move signals low interest rates for the foreseeable future, and it replaces the Fed’s earlier pledge of low rates “at least through mid-2015.”

All of this is bullish for gold and we would expect the moves to put upward pressure on gold prices in the coming weeks. There have been a few occasions where extremely loose monetary policy announcements have not seen an immediate rise in gold prices and this will likely be the case again.

Gold Chart Yearly, 2011-present – (Bloomberg)

In the run up to the year end the fiscal cliff negotiations will put pressure on the U.S. dollar as will the more important $16 trillion and rapidly growing national debt and the $50 trillion to $100 trillion in unfunded liabilities.

The European Union has agreed to give the European Central Bank the authority to directly supervise the eurozone's biggest banks and intervene in smaller banks at the first sign of difficulty.

Cross Currency Table – (Bloomberg)

Strong support for gold is at the 200 day moving average at $1,662/oz, however there has been physical buying today on the dip below $1,700/oz.

ScotiaMocatta, Barclays Capital and UBS flag support at $1,684/oz, gold's November low. 

NEWSGold prices skid on profit-taking after Fed – Market Watch

Gold falls as Fed move raises concern on stimulus scope - Reuters

Gold Drops to Lowest Level in a Week on U.S. Budget Negotiations - Bloomberg

EU nations agree to eurozone banking union – The Telegraph

Vince Cable: investors' expections of bank returns are 'unrealistic' – The Telegraph

COMMENTARYGold - It's Time – Zero Hedge

Expect a seasonal rally in silver from Christmas until April - Mining

Carney, New Governor of BOE, Dives Straight Into Monetarist Loony Bin – 24HGold

“Holy Grail” Gold Evidence Panics Western Central Banks – King World News

The Gold Market Seen Through a Glass Darkly - GoldSeek

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