Gold Prices jump after Fed interest rate projections...
Recorded 27 January 2012
Transcript from 27 January 2012, written by Ben Traynor
This week was all about central banks, and especially the Fed, which revealed on Wednesday that its policymakers see interest rates staying near zero until at least the end of 2014.
Chairman Ben Bernanke also said that if necessary the Fed is "prepared to provide further monetary accommodation". This was widely taken as a hint that more quantitative easing could be on the way.
Gold and silver's reaction was instant. The spot market gold price jumped nearly 4% following the news – breaking the $1700 barrier first breached back in August after the US downgrade by Standard and Poor's.
Silver meanwhile shot up nearly 6% on Wednesday.
Wednesday's jump set gold up for its biggest weekly gain since December Second. That week saw a similar intraday jump – also on a Wednesday – after the Fed and five other central banks said they would lower the cost of Dollar borrowing.
On this evidence, it would appear increased liquidity is good news for precious metals prices – especially when that liquidity is cheap.
Latest figures from the International Monetary Fund show that the central banks of Mongolia and Kazakhstan bought gold in December.
These moves capped a strong year for central bank gold buying. Precious metals consultancy GFMS has estimated that the world's central banks bought 430 tonnes of gold last year.
Looking ahead to 2012, GFMS says it expects "ongoing robust purchases from the official sector". Investment bank Goldman Sachs meanwhile has said central bank gold buying could reach 600 tonnes this year.
Next week brings a host of economic data, including worldwide manufacturing figures and US jobs news, culminating with nonfarm payrolls at the end of the week.
Monday also sees yet another European summit, where policymakers will be hoping to finally put the Greek debt issue to bed – especially since the bond market is already turning its attention to Portugal.
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