Gold News

"Overwhelming Bearish Pressure" Drops Gold Price Thru $1200 as US Fed Halts QE, Silver Hits New 5.5-Year Low

GOLD PRICES fell to 3-week lows beneath $1200 per ounce in London trade Thursday, extending this week's drop to 2.4% after the US Fed held rates at zero but tapered the last $15 billion of its monthly QE program as expected.
Silver fell harder as broader commodity indices fell 1%, hitting new 5.5-year lows beneath $16.40 per ounce.
From the near-$4.5 trillion portfolio built since late 2008, Janet Yellen's Fed committee will continue "reinvesting principal payments" from mortgage-backed bonds as well as " rolling over maturing Treasury securities."
Fed research, says Standard Bank forex strategist Steven Barrow, "has suggested the Fed's balance sheet won't be back to normal for at least another five years...[or] a lot longer.
"The [equity] market should have little to fear from the end of QE yesterday," Barrow concludes.
US Treasury bond prices rose Thursday, pushing 10-year yields down below 2.30% – almost one-quarter point lower from this time last year, before QE tapering  began.
Gold prices, in contrast, face "overwhelming bearish pressures" according to Swiss bank and London bullion market maker UBS, pointing to this month's low near $1180 per ounce – the 'crash low' hit twice in 2013.
"Besides clobbering gold," says US brokerage INTL FCStone analyst Ed Meir, "the Fed policy statement also knocked US equities back, although there was somewhat of a recovery."
European equities fell hard Thursday, down 1.6% at one point in Frankfurt, but also rallied as the Euro and Sterling steadied near 3-week lows versus the Dollar.
Gold mining stocks meantime sank, with No.1 producer Goldcorp (NYSE:GG) sinking 10% to new multi-year lows after reporting a third-quarter loss and forecasting 2014 output at the lower end of forecasts.
Competitors Barrick (NYSE:ABX) lost 4% to new 12-year lows despite beating analysts' Q3 forecasts yesterday and reporting a cut in so-called "all in sustaining" costs to $880-920 per ounce mined.
Over in China – where Shanghai's main gold contract ended Thursday at a discount to London prices for the first time in 5 weeks – customs officials are meantime investigating a surge in silver exports after bullion shipments were classified as "acoustic wire" for audio equipment.
"It's an open secret," Bloomberg quotes analyst Liu Xu at Capital Futures Co. in Beijing, "that a lot of silver exports have been thinly-veiled attempts to profit from tax rebates" worth 17% and intended to boost high-end technology exports.
Separate analysis from the Financial Times today says that bad loans at the two largest banks in China – now the world's No.1 gold consumer nation ahead of India – are rising "at the fastest pace in at least seven years" but remain "manageable".

Adrian Ash

Adrian Ash, BullionVault Gold News

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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