Gold News

Gold Leaps as Fed Monetizes $300Bn of US Treasuries, $750Bn of Mortgage Debt; Stocks & Euro Also Leap as Bond Yields Collapse

Gold Prices leapt as London dealing ended on Wednesday on news that the US Federal Reserve is creating $300 billion to buy long-dated Treasury bonds, plus another $750bn to buy mortgage-backed debt from Fannie Mae and Freddie Mac.

Citing the "risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term," the Fed sparked a 5% jump in the Gold Price, plus a 3¢ jump in the European single currency to 10-session highs.

Gold had previously drifted as low as $886 an ounce amid analyst comments that the Fed would not move to buy US government debt with freshly-created reserves – effectively "monetizing" Washington's financing needs in a bid to boost the money supply, devalue the Dollar, and reflate the ailing economy.

Wall Street stocks also jumped on the news, though less dramatically, driving the S&P 500 index up 2.5% from an earlier loss.

The Fed also kept its key overnight interest rate on hold between zero and 0.25%.

Its purchase of US Treasury bonds sent the government debt market soaring, squashing the yield offered by 10-year notes down a massive half-a-per-cent to 2.53%.

Thirty-year Treasury yields sank to 3.45% – down sharply from Wednesday morning's new four-months high – as their price leapt on news of the Fed's $300bn buying intentions.

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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