Gold prices jumped to the highest level in 2 weeks after dovish comments by the Fed Chairman Ben Bernanke. The stance to maintaining loosening monetary policy sent the US dollar, helping the rise in the yellow metal. Market sentiment was also driven up by Germany's Chancellor Angela Merkel's indications that the biggest economy in the Eurozone would allow an increase in the firewall for the debt crisis. Wall Street gained with the DJIA and the S&P 500 indices adding +1.23% and +1.39% respectively.
Fed Chairman Ben Bernanke stated that continuous stimulus from the central bank is need for further improvement in the job market. In a speech in Arlington, Virginia, Bernanke said that the decline in unemployment over the past few months might be a reversal of the unusually large layoffs that occurred' in 2008 and 2009. Yet, the process might have ended. Further improvement in the employment market can, however, be supported by continued accommodative policies'. Investors viewed that the comments indicated further easing is likely. This has also revived hopes of QE3.
In the Eurozone, Germany's Chancellor Merkel stated that the ESM and the EFSF can run in parallel so that more funds can be used to resolve the sovereign debt crisis. According to Merkel, in order to have the full EUR500B at our disposal, we could imagine that we let the programs that have already been disbursed run in parallel'. In this care, the total size of the firewall would be raised to 700B euro. Meanwhile, the ECB President Mario Draghi affirmed that the central bank would take decisive measures' to fight against the crisis. Draghi stated that no single institution can carry the burden of addressing a set of challenges that are simultaneously economic, financial and fiscal...The current stabilization should not make us pause in our responses'.
On the dataflow, while the Germany IFO beat expectations, pending home sales in the US surprisingly fell -0.5% m/m in February, worse than consensus of a +1.0% gain and a +2.0% rise in January. Today, the Germany Gfk sentiment probably edged +0.1% point higher to 6.1 in April. In the US, consumer confidence might have dropped to 70 in March from 70.8 a month ago.