Gold and Silver Take A Serious Tumble Federal Reserve Chairman Ben Bernanke tried to carefully explain how the central bank will figure out when it’s the right time to pull back on its monthly bond purchases, but investors didn’t have any of it. The Dow Jones tumbled more than 200 points, or 1.4%, on Wednesday afternoon after Bernanke took questions from the media about the Fed’s exit strategy. S&P 500 also dropped 1.4% and NASDAQ sank 1.1%. Stocks had been in the red all day, but were barely below the break-even line before the Fed chairman began speaking. The Federal Reserve left interest rates unchanged and said it would continue with its current bond purchase program – $85 billion in mortgage-backed securities and Treasuries each month – for the foreseeable future. But during his press conference, Bernanke highlighted scenarios in which the Fed would consider tapering. Commodities tumbled; the US dollar soared while gold took the biggest hit on Thursday morning. Mr. Bernanke’s comments did not come until late in the day, so many markets are reacting this morning. Crude oil seemed to be frozen after the EIA inventory showed higher than expected stocks, while gold seemed stuck after the decision. This morning gold has tumbled close to $28. to trade at 1346.05 as traders digest Mr. Bernanke’s comments. Silver suffered bigger losses to trade at 21.16 down by 46 cents after Chinese data disappointed markets with HSCB PMI data showed a continued contraction in manufacturing weighing heavily on industrial metals. China’s factory activity weakened to a 9-month low in June as demand faltered, a preliminary survey showed, and heightening risks that a second quarter slowdown could be sharper than expected After market closing hours gold prices fell on Bernanke’s comments that he expects to slow the pace of the central bank’s bond purchases later this year and bring them to a halt around mid-2014. Fed also lowered its inflation forecast sharply which hurt gold’s inflation hedge appeal. SPDR Gold Trust, the largest gold-backed exchange-traded fund’s holdings fell below 1000 tonnes for the first time in 4 years to 999.56 tons. Demand in India has fallen off since the government hiked the import duty on bullion. China demand has slowed from peak levels seen earlier in the year. Gold prices internationally are expected to go down on rising bond yields and low inflation expectations in US. A stronger dollar internationally can further weigh on prices. The dollar is climbing steadily this morning trading at 81.78. Gold fell for a fourth straight session on Thursday to its lowest level since a 15% plunge in mid-April, after the US Federal Reserve signaled it would slow the pace of bond purchases later this year. A scale-back of the $85 billion monthly asset purchases is likely to weaken support for gold prices, already down about 20% this year due to rapid outflows from exchange-traded funds and slowing demand in top consumers, India and China. Fed chairman Ben Bernanke said on Wednesday the central bank will continue to reduce the pace of purchases in measured steps through the first half of next year, ending purchases around mid-year if the US economy continued to show strength. Until recently, gold – seen as a hedge against inflation – had gained as the global economy took a hit and central banks acted to boost their economies. Gold touched an all-time high of $1,920.30 in 2011.
Posted on: Thu, 20 Jun 2013 09:11:13 +0000
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