Gold Holds US Fed Surge, Silver Jumps 9.5% on "QE Unlimited"
Thursday, 9/19/2013 13:37
GOLD held onto its post-US Fed surge in Asian and London trade Thursday, regaining the $1370 per ounce level as world stock markets, foreign currencies and commodities extended their jump versus the Dollar.
The Fed voted against "tapering" its quantitative easing program, defying the expectations it had built since April and giving what one FX strategist called "a massive green light for a risk-on party."
Silver had hit a new 5-week low shortly before the Fed announcement. It stood 9.5% higher barely an hour later.
"We are in QE unlimited," said money-manager and
Gloom, Boom & Doom publisher Marc Faber, speaking to Bloomberg last night and stating that "I always buy gold...I view it as an insurance policy. I think responsible citizens should own gold.
"The Fed don't know anything else to do [but print]. They've boxed themselves into a corner."
Discussing the next likely chair of the US central bank, "Janet Yellen will make Mr.Bernanke look like a hawk," Faber said.
The US stock market yesterday surged to new all-time highs between the Fed statement and Chairman
Bernanke's press conference 30 minutes later.
Gold prices gained 6.4% from their earlier low, and silver enjoyed its biggest one-day jump since June 2012.
Bond prices rose to push 10-year Treasury yields to a 3-week low, falling at the fastest pace since 2011.
"The Fed put markets in celebratory mood," says Commerzbank's daily commodities note, adding that "the development of gold ETF holdings over the next few days will give us a clearer picture here.
Because on Wednesday, says the bank, "gold ETFs again saw slight outflows."
Investors in all markets "turned to the buy side with a vengeance," says Edward Meir for brokers INTL FCStone.
But "although the Fed decision is a potential game changer and may give gold a new lease on life," Meir adds, "we would be looking for higher volumes and increased ETF buying to lend further credibility to Wednesday's gain."
"I cannot get overly excited about gold up here," agrees Marex Spectron's David Govett.
"This rally was as much about short covering as it was about fresh buying. Fundamentally nothing has changed. At some point the Fed will taper."
Silver's 7.1% rise from Wednesday to Thursday's London Fix was the 78th largest move in 45 years.
Gold began rising before Wednesday's Fed statement, adding $20 of the $83 per ounce it would gain by this morning's peak in late Asian trade.
Gold rose less quickly for non-US investors, however, as the Fed's action saw the Euro and Sterling both hit their best levels since midwinter on the FX market.
The Dollar also fell in a straight line against emerging-market currencies previously dented by taper expectations, losing 3% against the
Indian Rupee, Brazilian Real and Turkish Lira.
"We think it's very important that emerging markets grow and are prosperous," said Fed chairman Ben Bernanke on Wednesday.
"We play close attention to what's happening in those countries. It affects the United States. [But] what we're trying to do with our monetary policy...is to create a stronger US economy."
Away from the US Fed, gold and silver industry group the Bombay Bullion Association said it unanimously backs nationalist BJP candidate Narendra Modi as prime minister in the 2014 election in India – the world's largest consumer market for gold.
"The bullion traders in this country are desperately looking for a change in the Indian political system," said BBA president Mohit Kamboj.
"Narendra Modi is the right choice," he added, repeating how
gold and politics in India were seen interacting earlier this week by BBA colleague Mukesh Mehta.
"We wish BJP to come to power and run this country."
Ruling Congress Party economic affairs secretary Arvind Mayaram today said the government's aggressive anti-gold import rules had cut inflows "drastically".
"Because of the measures we have taken we expect imports of only 750 tonnes [in 2013]," he said – a drop of 11% from fiscal-year 2012.
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