Fed Policymakers Already Plugging QE4
Los Angeles CA, (Tangible Investments) - by James O’Dell - The Gold price rose in electronic trade early Monday and is currently trading at $1,244.80 an ounce, after easing $0.80 or 0.7 percent to finish the week at $1,238.30 an ounce on Friday. Markets fretted over the future of global growth prompting equity markets to sell off sharply and savvy investors to turn to physical Gold as a safe-haven asset. Silver slipped $0.11 or 0.63 percent to end the week at $17.28 an ounce, while the Gold/Silver ratio hit a new 5 year high of 71.66.
Last week began with a warning by Fed Vice Chairman Stanley Fischer that immediately boosted investor interest in Gold. “If foreign growth is weaker than anticipated, the consequences for the U.S. economy could lead the Fed to remove accommodation more slowly than otherwise,” said Fischer.
Then San Francisco Fed President John Williams suggested on Tuesday that another round of quantitative easing (QE4), may be in the cards, if after unwinding the current QE program, scheduled to wrap up this month, the Fed fails to reach its inflation targets. "If we really get a sustained, disinflationary forecast ... then I think moving back to additional asset purchases in a situation like that should be something we should seriously consider," said Williams.
The Dow lost another 173 points (after being down 460 at mid-day) on Wednesday, or a loss of 852 points in just four days. In the meantime, the rising number of open positions in the Gold futures market, as the price climbs, points to increasing optimism and fresh buyers entering the market, according to strategists.
“That’s definitely positive for Gold,” says Charles Nedoss, of LaSalle Futures Group. “If you go back to classic Dow (technical-analysis) theory, a rising market and rising open interest are bringing in new longs.” Longs, stands for bullish traders, while shorts stands for those who bet against the yellow metal in the paper Gold market.
On Thursday, St. Louis Fed President James Bullard suggested that the Fed consider delaying further unwinding of its current QE program. U.S. equities markets posted their fourth straight weekly decline last week, their longest losing streak since 2011, over fears that the global economy is slipping back into recession, while physical demand for Gold has picked up dramatically.
Analysts said it was growing investor concern over the euro zone economy that helped to push Gold to five week highs as yields climbed in some of the peripheral euro area countries.
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