Market Update – GoldCore
Gold Price Retreats As Dallas Fed Indicates QE Tapering By December
Today’s AM fix was USD 1,292.00, EUR 972.97 and GBP 840.38 per ounce.
Yesterday’s AM fix was USD 1,311.00, EUR 986.83 and GBP 852.91 per ounce.
Gold fell $6.30 or 0.48% yesterday and closed at $1,301.40/oz. Silver fell $0.14 or 0.71% and closed at $19.68.
Gold edged off over 1% as some positive global economic data tarnished its safe haven appeal coupled with quiet physical
demand in Asia and technical selling which added pressure after $1,300/oz was breached.
Click for big version.
Support & Resistance Chart, 5 Year - (GoldCore)
Gold is now down for the 5th straight trading day breaking below the psychological $1,300/oz and was not helped by the
release of better than expected U.S. non manufacturing data.
Comments from the Dallas Federal Reserve President, Richard Fisher, that the Fed was a step closer to withdrawing from
its unorthodox QE programmes may have driven the decline. Mr. Fisher joins a growing chorus of voices calling for a
tapering of the QE programmes believing that they have created a burden on savers and retirement pools, via low interest
rates and could ignite an inflationary "conflagration". Mr. Fisher stated that the Fed now owns 20% of Treasury Notes
and T-Bonds outstanding and 25% of Mortgage-Backed-Securities.
The markets are now focusing on when and how the Fed will extricate itself from its policy of quantitative easing.
Debate is focusing on a date between September and December for the first stages. It will all come down to timing and
language and the management of market expectations. Powerful forces are in play and with the debate over the forthcoming appointment Fed Chairmanship
the timing could not be worse.
If the Fed drop the ball and move too quickly they could endanger the fragile economic recovery, on the other hand if
they move too slowly they could stoke inflation in the near term.
In the near term gold prices will likely move as this debate ebbs and flows. The long term fundamental arguments for
gold are still very much intact. The world is still in the midst of a massive economic and socio-political storm
stretching from Asia to Europe and to the U.S.
In an article published in MIT’s Technology Weekly titled “How Technology Is Destroying Jobs
” a very interesting analysis of the modern economic technology driven model is made. The article written by David
Rodman reviews MIT research into the relationship between productivity gains and employment and very clearly
demonstrates that the social contract at the heart of the capitalist system may be in trouble.
Essentially even though the economy may grow and industry may profit the benefits are not being translated in terms of
jobs and by extension worker earnings. Interesting stuff, and this thesis may make the entire policy of QE, its attack
on pensions and savers plus the ever increasing social unrest seen all around the world; be seen for what it is -
unorthodox and very, very risky.
News From Around The World
As The Crisis Deepens, Gold Flows East
Over the last three decades what began as a trickle of gold and silver moving east has become a flood. This is precisely
what one should have expected. Loose and looser American fiscal and monetary policy has led to the export of dollar
inflation to those countries – notably China – that have pegged their currencies to the dollar.
The obvious consequence of higher prices abroad has led to higher demand for precious metals as a store of value in the
Headline topics covered July's Insight:
• Crisis: the new normal
• In a zero sum game, someone has to be the loser
• The business model: speculation
• When the data is bad, make up the data
• Gold and silver: huge demand meets too much leverage