Tuesday, March 27, 2012

Bernanke speaks, gold price rises.

Bernanke lifts gold price again


Gold barsPrecious metal bulls have got used to being “saved” by Federal Reserve Chairman Ben Bernanke in recent years. Frequent spurts higher in the gold price often coincide with Bernanke press conferences, in which the chairman vows to maintain easy money policy at the Federal Reserve. Yesterday was a classic case of this, with gold gaining around $20 in a matter of minutes just after 12GMT following Bernanke’s comments that more progress on unemployment will require "more-rapid expansion of production and demand from consumers and businesses, a process that can be supported by continued accommodative policies."
As Trader Dan Norcini comments, pity the poor Fed Funds Futures traders. No sooner do we have glimmers that rates are going to rise as the US economy picks up pace and inflation rises, than do we have the Fed Chairman himself come out and quash these rumours. Dan correctly notes that Bernanke is terrified of rising rates. The US is in a debt trap from which there is no escape without considerable economic pain.
Little wonder then, that some analysts view our current epoch as “the most favourable era for gold prices in our lifetime”; BMO Financial Group’s Don Coxe adding that “governments are running deficits "beyond the forecasts of all but the hardiest goldbugs five years ago; central banks are printing money and creating liquidity beyond the forecasts of all but the most paranoid goldbugs a year ago."
Unsurprisingly, the dollar sold off yesterday, with the USDX now below 79.00. 80.00 is looking more and more like a “hard top” as far as this index is concerned, Gregor Macdonald and others noting that capping any rise in the dollar is an important aspect of current US government policy – though one that is seldom discussed in much detail by mainstream media.
A result of this official determination to weaken the dollar is of course, more people looking to buy precious metals.
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