The Fed’s Confusion and the End of Gold’s Selloff

This week Gold prices came close to hitting the $1,300.00 per ounce mark mid-week and many experts believe prices may have found a steady base given that this week is on track for an overall gain.

Bernanke’s Comments

Wednesday afternoon’s comments by Federal Reserve Chairman Ben Bernanke came as somewhat of a surprise to investors. It turns out the Fed will be continuing the monetary policy for some time. While new jobs have been added in the recent months, the unemployment rate has yet to be seriously changed, and this is the real number the Fed is keeping their eyes on.

In a recent article by Kitco via Forbes, “Bernanke’s remarks, along with the FOMC minutes, released Wednesday afternoon, showing a deep split between members on when to start to wind down the Fed’s monthly bond-buying program (quantitative easing) has at least temporarily changed the market place’s notions of when QE will begin to be scaled back. It appears the market place now believes the Fed will start to “taper” its monthly bond buying program later rather than sooner.”

While we may have the Fed to thank for these recent boost in gold prices, it seems that there may be some slight back and forth in both the price of gold as well as exactly when the stimulus tapering will begin. Until that time however, gold may be finding its new low for other reasons…

Is this the End of the Gold Selloff?

Warren Hogan is the Chief Economist of Australia and New Zealand Banking Group Ltd., as well as veteran global economic professional. In an email report by Hogan he stated, “We expect the pace of liquidation of gold positions to abate or even reverse over the year ahead. Emerging market central banks will remain accumulators of gold over the medium to long term.”

As the global selloff of gold slows and major banking systems are still on course to purchase massive quantities of gold over the coming years, gold may be now settling into a nice base from which to grow over the coming years.

With this week on track to post an overall gain for gold it may be a sign of things to come. Many economists agree that for a stable bull market to be present – a steady foundation must be laid from which to grow upon. Demand for gold isn’t going to simply disappear. Its value is too desirable for banks, jewelers, investors as well as industrial and electronic companies to ignore.

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Resources: Forbes, Bloomberg