Tag Archives: Federal Reserve

Sep 28

Price of Gold Weekly Recap – September 24-28, 2012

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Monday Open: $1,764.50
Weekly High: $1,782.50
Weekly Low: $1,739.00
Friday Close: $1,774.70

 

Gold stayed in a pretty neutral trading range this week with a slight dip occurring in the middle of the week. Some investors expected gold to break the $1,800 bubble this week, but it didn’t happen; instead, gold experienced some trade offs and a reaction to the European financial dilemma in Spain.

Monday opened slightly lower after investors started taking profits over the weekend in response to news of lower crude oil and grain prices. Tuesday saw gold holding strong despite positive U.S. economic data, most likely because of the breakthrough news a couple of weeks ago that the Federal Reserve would be implementing some new fiscal policies that would inevitably boost inflation, and therefore a safe haven in gold. So, even with slight bursts of good news for the dollar, employment or the housing market, gold has the Federal Reserve’s policies to lean on for growth.

The dip that occurred on Wednesday was a risk-off move by traders responding to protests in Spain and Greece against the countries’ austerity measures, a sign that the European debt crisis is once again on the world economy’s radar. There are some worries that the European Union may back down from some of the policies reached during the summer.

Yet, Thursday took a U-turn upwards when Spain announced a new program of spending cuts and tax increases, indicating they may want to borrow money from neighboring economies. For a long time, speculators have been waiting for Spain to ask for bailout money from the European Central Bank, and some see this is a positive sign. This pushed gold up $26.80.

Additionally, China is not necessarily thriving, and many hope that China will embark on economic measures to boost its economy. The bottom line is that no powerhouse world economy has a strong currency right now, and this is the number one reason why gold is reaching the heights that it is.

“If you put together stimulus on three continents … that’s a good inflationary outlook,” George Gero, of RBC Global Futures, said.

Finally, gold ended the week a little lower due not to external forces, but to a wrapping up of the week and the third trading quarter. Investors took their gains from a lucrative quarter, which experienced a tremendous growth of 11% in the July through September period. This was the yellow metal’s biggest quarterly gain in two years, largely fueled by Fed policies.

Sep 21

Price of Gold Weekly Recap – September 17-21, 2012

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Monday Open: $1,762.50
Weekly High: $1,786.70
Weekly Low: $1,755.30
Friday Close: $1,773.00

Coming off of last week’s immense gains, gold showed considerable strength this week, staying in the $1,750 – $1,780 range and then jumping to its highest peak of 2012 on Friday. Last Thursday gold reached the highest price of the previous in six months after the Fed announced further monetary easing in order to curb unemployment, and this week, it was upon speculation that Spain, a country already unstable financially, might reach out to take on monetary assistance from other European countries that caused the subsequent rally.

Amidst the global financial crisis, gold performs excellently because it is seen as a hedge fund against inflation and weak paper currency. Even though last year saw gold reach an unprecedented $1,900 per ounce (compared to $300 per ounce in 2003), speculators who expect to see gold surpass this benchmark this year are not uncommon. Especially after a slow summer and the recent upward trend for the precious metal, talk abounds of gold soon hitting $1,800, then $2,000, then eventually $2,400.

Analysts at Merrill Lynch wrote in a report that they expect to see gold reach $2,400 by the end of 2014. They also don’t expect to see gold dip below $1,500. “Given the new open-ended nature of QE3, the upward pressure on gold prices should continue until employment is strong enough to require a change in policy. In our view, this is unlikely to happen until the end of 2014,” the report said.

This is the Federal Reserve’s third stimulus program since the 2008 financial crisis, and consists of the government buying around $40 million of mortgage-backed debt each month to reduce consumer debt and boost the economy. Especially in conjunction with “Operation Twist,” which consists of the Fed buying a lot of short-term loans in order to cut down on long-term debt, this is a much more aggressive series of policy than most anticipated, which translates into good tidings for gold.

To sum up this week, Monday prices fell largely due to profit-taking, according to most sources. Profit-taking pressure and continued through Tuesday. On Wednesday, gold jumped slightly off of news that Japan was going to be enacting some new stimulus measures, including 10 trillion yen, or the equivalent of $128 billion, to buying asset funds. The U.S. dollar index was also weaker on Wednesday. Keep in mind, this is in addition to the European Central Bank’s announcement earlier this month that they’d be buying troubled E.U. bonds. Then on Friday, speculation that Spain would be undergoing further borrowing prompted one last move upward for the week.

Sep 14

Price of Gold Weekly Recap – September 10-14, 2012

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Monday Open: $1,725.80
Weekly High: $1,777.10
Weekly Low: $1,724.80
Friday Close: $1,770.50

This week followed a bullish trend for gold since about a month ago when Federal Reserve Chairman Ben Bernanke gave solid indication he would instate quantitative easing. Gold bugs have been waiting for further news on monetary policy, and this week revealed the Fed’s plan to the delight of gold investors. After the doldrums of summer, during which gold started to dip below its previous holdings, gold is finally seeing a tremendous upsurge.

Last week gold hit a six month high, and this week saw gold shoot up another $30 to close just a third of the way below the $1,800 mark, a long way from when gold was hovering around $1,550 in the earlier summer months. Many believe $1,800 is just around the corner, and that 2012 could set the next record for gold’s highest price by catapulting it above $2,000.

Monday opened a bit softly after Friday’s reports of unemployment data and Fed expectations, but hit a solid stride mid-week and jumped drastically on Thursday after Bernanke finally revealed the Fed’s newest financial policies. The entire week, and month in fact, had been building up to Bernanke’s Thursday afternoon address at the third quarter FOMC meeting.

On Thursday, the Fed revealed its plan to spend $40 million buying mortgage-backed dept until employment improved and inflation remained contained. After months of uncertainty, the Fed has shifted focus from price stability of the dollar to boosting employment statistics. Also, the Fed stated it would probably not raise interest rates (which are at historical lows) until 2015, and Operation Twist is a key part of the policy, which retains that the Fed will buy longer-term securities as shorter-term ones mature.

To sum up, this means that inflation could be on the near horizon, and even the possibility of a weaker dollar encourages people to flee to the safety net of gold. After Thursday’s news, the price of gold rose 2%. This is the third round of quantitative easing enacted by the Fed since the recession began in 2008.

“The Fed’s inflationary behavior should be bearish for the dollar in the long run and drive investors to seek protection via the gold market,” Jeffrey Sherman said, who is the commodities portfolio manager of DoubleLine Capital, a company with more than $40 billion in assets.

Historical trends and the time of the season make it very possible that gold could rise to even higher, unprecedented heights. Chief Executive of Newmont Mining Corp., the world’s second largest gold producer, Richard O’Brien told participants at the Denver Gold Forum that $2,000 was just around the corner.

In related news, the Republican party has been calling attention to the possibility of returning the U.S. to a gold standard in recent weeks.

Sep 01

Weekly Gold Price Recap – August 27-31, 2012

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Monday Open: $1,674.70
Weekly High: $1,692.40
Weekly Low: $1,653.80
Friday Close: $1,691.60

The entire week was spent in anticipation of Fed Chairman Ben Bernake’s address on Friday, so there was not much movement for gold until then, but once Bernake gave his speech, gold shot straight up after his remarks implied that monetary easing was surely on the horizon. After a slow summer of waiting for the Fed to reveal some clue as to their fiscal intentions, finally Friday brought some relief for gold bugs banking on gold investments taking even higher turns than last year. The beginning of the week until Friday morning saw the price of gold hovering around $1,650, with a few dips from hesitant expectations regarding Friday, and a few small upturns from poor economic data, but once investors got the green light from Bernake, gold peaked at just over $1,690.

With the U.S. economy still in a shambles, Bernake spoke Friday at the Fed’s annual retreat in Jackson Hole, Wyoming and gave clear intentions of boosting the economy with some financial policy.  The Federal Reserve has the power to increase government bond buying, lower interest rates, print more paper money and other economic incentives to keep the economy rolling. When this happens, the economy may see an upturn, but it is at the expense of increased inflation. When inflation increases, the dollar weakens, and gold becomes more valuable as a safer investment.

Though Bernake didn’t explicitly state what moves he was going to make, he did admit that further policy has become necessary since unemployment is still so high and the state of the economy is still “far from satisfactory.”

The European Central Bank is still on the fringe of economic recovery, and ECB president Mario Draghi cancelled his appearance at the Fed’s Jackson Hole meeting due to a heavy workload, he said. The ECB Governing Council will hold a meeting next week to discuss measures that could bolster the euro. The economic upheaval in Europe continues, this week with Catalonia, a region of Spain, asking for a bailout from Madrid. Also, EU unemployment rose to 11.3% in July. Eurozone troubles could strengthen gold.

Aug 24

Price of Gold Weekly Recap – August 20-24

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Monday Open: $1,618.80
Weekly High: $1,673.50
Weekly Low: $1,613.30
Friday Close: $1,670.30

Finally, after a long summer of stagnant gold prices, this week marked a three month high and a steady rise in gold after U.S. Federal Reserve and European Central Bank leaders indicated the easing of monetary policy that gold bugs had been hoping for since the first quarter of the year. Though still hovering below $1,700, while last year around this time gold was hitting the historical highs of $1,900, this week provided a lot of the solid clues investors have been waiting for on the gold front.

Monday was not especially remarkable in that trading stayed fairly sideways a little above $1,600, but Tuesday began the upswing that continued throughout the rest of the week. This entire summer, the U.S., European and Chinese governments have been under close watch by gold investors, since any recession-fighting tactics like printing more paper money or changing interest rates would weaken their currencies, thus strengthening gold as a hedge fund.

On Tuesday, after a few weeks of speculation about the ECB bailing out European countries, Spain  added $5.4 million to its debt at lowered costs from the ECB, which gives hope that the ECB will buy government bonds to keep costs low. Inflation drives up the price of gold. China also started injecting more liquidity, or offering low-rate loans to member institutions, which bolsters confidence in gold.

Wednesday marked a big day because after months of expectant anticipation that Fed Chairman Ben Bernanke would ease monetary policy with little concrete evidence, he finally provided the strong signal that gold hopefuls were waiting for.

According to the minutes from the meeting, Bernake stated, “”Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery.” This is a more substantial indication of policy to come than has been seen in the past months.

Gold jumped nearly $40 after the news, primarily launching upwards on Thursday as China, the U.S. and the European Union all seemed to strongly allude to recession-era measures to keep their economies afloat, which translates into greater safety in gold. While Tuesday hit a two-month high, Thursday broke the record with the highest point in four months.

Santa Monica precious metals broker Marin Aleksov calls this trifecta of economic bailout the “perfect storm” for gold.

Some are still pessimistic that any actual policy change will occur, based on Bernanke’s past ambiguity, and Friday saw a slight slowing down of the gold frenzy of the week to level off around $1,670.00. The significance of this week is simply that gold seems to have emerged from the limbo state it’s been stuck in for months.

Adam Sarhan, CEO of Sarhan Capital, commented optimistically, “Gold has this week broken out of its well-defined, multimonth downward trendline. That resistance which kept gold in a range in the last several months should become a new level of support, suggesting gold is not going down but going higher.”

Many believe an unprecedented bursting through the $2,000 mark is just around the corner for this precious yellow metal.

Aug 18

Price of Gold Weekly Recap – August 13-17, 2012

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Monday Open: $1,623.60
Weekly High: $1,623.60
Weekly Low: $1,591.10
Friday Close: $1,615.80

This week’s price of gold story unraveled too similarly to the one that’s been told every week this summer; investors are getting anxious at the lack of change in the market, yet are still mildly hopeful for an upcoming change of events. The three major factors that have kept gold in state of limbo for the first half of 2012 have not improved – the U.S. Federal Reserve has not eased monetary policy, the European Central Bank is slow to enact financial safety measures, and China and India have actually decreased their gold demand. This week saw some especially drab news in the world of gold investing, especially in terms of the global economy, but it was tempered by a new billionaire investor and a survey by Kitco that reports that gold bulls are still a majority.

Monday opened above the $1,600 mark, but that was the highest it would be all week. Early in the week, gold fell as bleak economic reports started tumbling in across the major nations. Japan, China, the U.S. and the European Union all reported economic stagnation without any concrete action to bolster paper reserves or otherwise buffer the commodities market. Gold rises as a hedge fund in relation to the dollar, the euro and commodities like oil, so the lack of movement in these realms translates to a lack of movement for gold.

Tuesday took a slight upturn after some fresh, weak U.S. economic data, but it didn’t last long. A slew of negative data started pouring in as the week wore on, including some statistics from the World Gold Council. According to this gold watchdog organization, gold dropped 7% in the second quarter compared to where it was last year at this time, and jewelry demand fell 15%. Alarmingly to gold bulls, 56% of this drop in gold demand occurred in India, which is well-known to be a powerhouse of gold consumption. A weak rupee and sluggish economic growth may have a hand in that. Also, it came to light on Tuesday that six more European nations are now in an official recession. With gold retreating for four quarters in a row, some may be asking: is the gold rush is over?

It’s hard to say, according to most speculators, but it does depend on a few factors, like central bank policy and the economic health of India and China. George Gero, vice president of RBC Global Futures, had this to say: “Unless we start to see some effect of stimulus, traders are concentrating on what is now. If traders can’t find something positive to point to, they tend to shy away from taking risks.”

And nothing drastic has changed in terms of Fed or ECB policy. The next meeting of the Fed is scheduled for August 31, but it’s hard to say whether any significant policy changes will be enacted. Still, this is the next date on the waiting list for gold investors.

Thursday and Friday saw an increase in the market, so that the week closed only about $5 below the week’s beginning.

But it’s still the same waiting game, and as the chief economist of precious metals trading company Degussa Goldhandel GmbH said, “The monetary affairs of the world probably play the most important role for gold prices going forward. The slowing economy will boost calls for easier monetary policy.” Depending on how central governments and banks respond, gold could see a green light ahead. Out of Kitco’s weekly respondents, 16 of 28 still feel optimistic.

In other somewhat positive news, billionaires George Soros and John Paulson increased their gold holdings, driving confidence to some in the market.

Aug 03

Price of Gold Weekly Recap – July 30-August 3

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Monday Open: $1,621.00
Weekly High: $1,625.40
Weekly Low: $1,586.30
Friday Close: $1,603.60

This week gold opened at a 6-week high, trailing off gains from last week’s European refinancing, and though the price of gold dipped lower as the week progressed, it still managed to close above the $1,600 mark. After last week’s 2.5% price jump due to news that the European Central Bank is prepared to give the economy a boost by printing more money (which will devalue the euro and send people to a safe haven in gold), Monday opened high but sank on Tuesday as many investors decided to opt out of gold and leave the market with the gains just made.

U.S. unemployment and job loss data was bleak early in the week, buffering gold losses, and the Fed gave an uneventful public address on Wednesday, which again confirmed no economic easing, though it did acknowledge economic sluggishness. Still, gold bulls are hopeful that the coming weeks will finally show some economic easing from the Federal Reserve.

By Thursday, gold had been on a 4-day downturn as both the U.S. and the Eurozone disappointed with a lack of concrete economic policy. Contrary to expectations, European Central Bank president Mario Draghi did not announce any monetary policy or interest rate changes. He addressed the public to say that any government bond buying wouldn’t occur until September, and only on certain conditions. Thursday dropped down to around $1,585 — $30 down from Monday.

“It appears that central banks now need more economic data for them to come out with more aggressive actions, and that’s disappointing for gold investors,” Phillip Streible said on the matter. He is the senior commodities broker at R.J. O’Brien, a futures brokerage.

Yet, gold rose a percentage point on Friday as the dollar buckled, more negative unemployment data rolled in, and investors once again began betting on Fed easing. This kept the yellow metal afloat above the $1,600 mark; although, the beginning of the week marked a 6-week high, the end of the week marked the biggest weekly drop in prices in the same time frame. Gold is still trapped in the $1,525 to $1,675 trading range, a long way from the year’s high of $1,781 in March, held captive mainly by the ambiguous remarks made on economic policy by Fed and ECB chairmen.

Jul 20

Price of Gold Weekly Recap – July 16-20

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Monday Open: $1,588.10
Weekly High: $1,596.50
Weekly Low: $1,569.30
Friday Close: $1,584.00

This week continued the typical holding pattern that gold has been experiencing since the beginning of the summer, following a few modest ups and downs but generally maintaining a steady balance, not straying not too far from $1,580 during this 5-day trading period. The major events of the week included anticipation of some change in Federal Reserve Chairman Ben Bernake’s economic policy, gains in the Indian rupee, a falling dollar and escalating conflicts in the Middle East.

Monday opened steady, with a weak dollar index, firm oil prices and news from China that their economy is still sluggish. Monday evening and Tuesday morning marked a slight rise in the price of gold to almost $1,600 (with some opting out of the market, as well), as bullish traders anticipated Bernake’s remarks on Tuesday afternoon. Despite the same story repeating itself over the past few months, where some clues indicate that Bernake may loosen U.S. economic restraints, thus burgeoning gold, he once again disappointed gold bulls on Tuesday with no concrete changes in financial policy. Compounding the disappointment was a slightly stronger dollar, and prices dropped to close lower on Tuesday.

Bernake spoke again on Wednesay, and true to pattern, said nothing on third quarter easing. Gold dropped slightly. Thursday revealed more weak U.S. economic data, spurring gold to climb back to its original state of around $1,580, and this foundation persisted through the end of the trading week. Friday saw slightly higher economic reports and a stronger dollar, but not enough to create a significant change in price.

Indian demand for gold is on the radar this week, as the rupee has been gaining strength and Indian traders, especially jewelers, are anticipating next month’s festival and wedding season. Gold is a tremendous part of Indian culture, especially special events and weddings, and though the rupee saw modest gains this week, Indian traders are still generally hanging out on the sidelines. Still, some analysts predict the price of gold to spike as much as 25% in the next month due to Indian demand.

In other news, a suicide bomber attacked a bus full of Israeli tourists in Bulgaria on Thursday, and late Wednesday, the Syrian defense minister was assassinated, heightening tensions in the Middle East. Any serious conflicts arising in the Middle East will likely spur a safety rush into gold, as well as increases in crude oil, which would also strengthen the precious metal.

With all these competing and mostly hypothetical factors influencing gold, the yellow metal seems to be stuck in a summer limbo. One report quoted Goldman Sachs as expecting gold to reach $1,840.00 per ounce in the next six months. As for now, traders are still waiting for U.S. policy changes, and Kitco’s weekly survey reported that participants are still pretty evenly split on the future of gold.

Jul 14

Price of Gold Weekly Recap – July 9-13

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Monday Open: $1,581.20
Weekly High: $1,600.10
Weekly Low: $1,556.30
Friday Close: $1,589.40

Gold took a minor upswing followed by an equal downturn this week, followed by another upswing to regain balance, opening around $1,580 to close at just about the same price. This week continued the major pattern of gold this year, with modest (under $50) fluctuations, though no major changes. Many experts believe that gold will hover around the $1,500 mark amidst all the economic changes happening in the U.S. and Europe, and if it does so, it remains a fairly stable investment. Reaching the $1,600 mark is always a slight cause for celebration, and it just touched it again this week.

Gold continues to rise inversely to the dollar, and Monday opened with a strong dollar, pushing gold down. Tuesday marked a volatile day, as morning news reported dollar losses, pushing gold up to exactly $1,600, then dropping back down $40 as updated information became available and the euro actually spiked tremendously. This proved to be the strongest inverse correlation between gold and the dollar in almost two months, since the dollar reached nearly a two-year high.

Still, gold is hovering in the safe range, which falls between $1,550 and $1,630.

Afshin Nabavi, head of MKS Finance, commented on this recent price range for gold. He said on Tuesday, “It looks like $1,630 is pretty much a brick wall, while on the downside, $1,550 is equally strong support. So unless something extraordinary happens, we will be stuck in this range…Everyone wants to get involved in gold, but they have been disappointed several times, so I think we need a confirmation that gold is really going somewhere, and that will only happen when it gets above $1,630, only then will we have some investment come back into the market.”

As for now, gold is trading in a fairly safe, yet limbo, state.

Wednesday and Thursday saw similar hesitations against the dollar, as investors await the Fed’s next move. Recently, the dollar has been performing well and the Fed hasn’t eased up on economic restrictions, keeping gold investors on their toes. More support has lately been headed in the greenback’s direction. China and Hong Kong have experienced some recent slowing of their economy, and investors waited expectantly all week to hear news of China’s refinancing policies.

So, as much as the price of gold dropped inversely to the dollar at the beginning of the week, it gained an equal amount in response to Friday’s news that China’s economic growth has fallen short of expectations. This report came a day after the Fed’s minutes reported no change in policy on Thursday, and gold saw a modest spike as investors took hope in the yellow metal’s recovery against a flailing yen. China reported a sixth consecutive quarter of losses, so Friday ended with a net weekly gain of about $6, as many believe the economic reports might spur the Chinese government into easing monetary rates.

Jun 16

Price of Gold Weekly Recap – June 11-15

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Monday Open: $1,594.70
Weekly High: $1,631.70
Weekly low: $,1585.80
Friday Close: $1,626.70

Gold has been on a steady upturn this week, trading fairly consistently above the $1,600 level. The metal has rebounded dramatically since last week’s pull away from the market when Federal Reserve Chairman Ben Bernanke gave no sign as to U.S. economic easing. This week, gold investors became more concerned with the European debt crisis, and the price of gold rallied when it became clear that Spain, Italy and Greece are all facing even more severe economic worries.

Monday started trading significantly higher than last week’s close after a rescue loan of $125 billion to Spain fell short of expectations to ease the country’s long-term economic instability. Italy also experienced greater debt, and Greece’s economy is in limbo as voters take to the polls on Sunday.

Wednesday saw modest gains, partly due to the release of more weak U.S. economic data. The entire week has seen asteady growth in gold, especially compared to the volatility of the past few weeks. Friday closed solidly above the $1,600 line.

However, while prices continued to rise throughout the end of the week, the price of gold still hangs delicately in between a safety net and risk asset. Upcoming events in Greece and the Federal Reserve will play a role in gold’s future. The Greek elections are this Sunday, and if voters ring in politicians who are against the bailout loans, as many expect, it could mean Greece moves away from the euro, further weakening the stability of the region’s currency. This could mean strength for gold as a security measure.

In fact, Kitco’s weekly poll showed that most people expect gold to rally after this weekend. In a sample of 23 participants, 18 anticipate a rise in gold. However, some skeptics aren’t sure of the outcome of the Greek elections, or whether it will signify a move to gold; some think it will actually strengthen the dollar.

In U.S. economic news, the Federal Reserve is scheduled to update the public on the state of economic policy this coming Tuesday and Wednesday, June 19th and 20th. As usual, investors are hopeful that Bernanke will announce some sort of loosened economic policy that involves printing more paper money, thus weakening the dollar and boosting gold.