Gold price drops as Fed cuts QE spending - MINING.com

Gold price drops as Fed cuts QE spending - MINING.com
Why Copper Could Be A Challenge To The Gold Price | Gold Silver ...
Peter Schiff wins the great gold price debate against Mark Dow on ...

Posted: 19 Mar 2014 01:52 PM PDT

The gold price extended its losses on Wednesday after the US Federal Reserve announced that it would cut its monthly bond purchases from $65 billion to $55 billion.

By late-afternoon the precious metal was trading at $1,329 per ounce, a 2% drop on the previous day, and its lowest point so far this month.

Following a meeting of the Federal Open Market Committee (FOMC) on Wednesday, the Fed wrote in a statement that since its last meeting in January "labor market indicators were mixed but on balance showed further improvement."

"The unemployment rate, however, remains elevated. Household spending and business fixed investment continued to advance, while the recovery in the housing sector remained slow. Fiscal policy is restraining economic growth, although the extent of restraint is diminishing. Inflation has been running below the Committee's longer-run objective, but longer-term inflation expectations have remained stable."

The gold price has been dropping over the past three days after the situation in Ukraine simmered, lowering demand for gold as a safe-haven asset.

This week's sharp drop is inconsistent with steady gains seen since the beginning of the year. And the precious metal is still doing much better today than it was at the end of 2013 when it fell below $1,200 an ounce.

Many traders were expecting the Fed to reduce stimulus spending this month, which is probably why the yellow metal didn't drop as much on Wednesday as it did when the Fed was just hinting at a possible tapering of its bond-buying program last summer.

The US government has been buying billions of dollars worth of mortgage-backed securities and longer-term Treasury securities each month since 2008 when the financial crisis hit. Gold soared as investors lost confidence in the US economy and dollar. But ever since the Fed announced last year that it would look at reducing its bond-buying program, the gold market has been unstable, shedding 28% of its value last year.

Why Copper Could Be A Challenge To The Gold Price | Gold Silver ...

Posted: 20 Mar 2014 02:41 PM PDT

This is a guest post by Alhambra Partners. Go to the website for information on Alhambra Investment Partners' money management services and global portfolio approach to capital preservation.

Gold has seen a healthy run since the first incidence of QE taper, again conforming to the idea that gold is tail risk insurance unrelated to inflation perceptions. That included a January rebuke to the collateral pressure/selloff pattern that we saw too much of in 2013. In the past few days, gold prices have come down a bit and that has coincided (somewhat) with another bout of forward rate incrementalism, bringing back the collateral pressure question.

GOFO March2014 price

There is any number of possibilities here, including profit taking from speculators, that would offer a compelling explanation for the past few days' gold trading. However, it would be wrong, in my opinion, to simply ignore the recent change in GOFO.

GOFO 2 March2014 price

Since forward rates began rising nearly a month ago, any collateral relationship would appear to be far weaker than previously observed. With that in mind, I can't help but think that there is a spreading illiquidity that might tie gold to copper, and thus China.

Copper futures March2014 price

In some ways, if this is correct, it may have been inevitable given the dollar situation there (more on that in another post). You would have to believe that as dollar liquidity worsens, the more broadly dollar shorts would appeal to keep funding their positions, even if it meant rehypothecating gold claims or leasing gold itself. There is little doubt that a large quantity of physical metal has made its way eastward across the Pacific, so it may be, in theory, available for liquidity alternatives to copper and the PBOC.

I think that is underscored more than in passing fashion by the slight backwardation in copper futures out to July. Such a short tenor of backwardation is the hallmark of collateral issues and liquidity strains. It is, unfortunately given the paucity of direct observation or even inference, a factor that bears closer scrutiny and further analysis before rendering any harder conclusions. With Chinese dollar shorts in clear dysfunction, there may be further gold spillover ahead, particularly as copper gets hammered. Will the safety bid under gold, evident since QE taper, be enough to offset some or all of this copper/China mess?

Peter Schiff wins the great gold price debate against Mark Dow on ...

Posted: 20 Mar 2014 09:11 PM PDT

Posted on 21 March 2014 with no comments from readers

Is the bull market over for gold? It's the great debate that money manager Peter Schiff and Bahaviorial Macro Blog author Mark Dow undertake in this landmark video. Most CNBC viewers thought Mr. Schiff won the debate, what do you reckon?

For Marc Dow gold is going higher before it drops much lower because 'ultimately the economy will improve, rates will go higher, we're not going to get the inflation that a few people still fear, and that will mean that the second half of the gold bubble will melt. But it's hard to tell if we're at that point now, or if that point comes a few months out.'

Peter Schiff says the economic recovery is a fraud and money printing will resume and boost gold prices. He thinks it is a fantasy to 'believe the Fed can actually unwind its balance sheet, that it can end QE, that it can raise interest rates and that the economy is going to keep on expanding. None of that is going to happen'…

Gold price drops as Fed cuts QE spending - MINING.com

<b>Gold price</b> drops as Fed cuts QE spending - MINING.com

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