Central bank could launch a third round of quantitative easing (QE3) if the U.S. economy worsens

The gold price bounced back from overnight losses on Wednesday alongside European and U.S. financial markets.  The spot price of gold fell as much as $16.38 to $1,526.50 per ounce in overnight trading – its lowest level since December 29, 2011 – before rebounding into positive territory by $6.67 at $1,549.55.  The SPDR Gold Trust (GLD), a proxy for the gold price and the world’s largest gold ETF, advanced $0.89 to $150.63 per share.

Greece's feared new elections and possible withdrawal from the euro have markets moiled and sweating. What do they do when they're worried? They run to US dollars, which they see as "safety." For me, I see that as escaping a lion by running into a bear's den -- with the bear inside. I reckon they'll discover that.  Now is on month of May and high gold demand season is on Oct so now is a good time to buy in gold.

Yesterday US time release of the latest Fed minutes – a recap of the most recent FOMC meeting – indicated that the Ben Bernanke-led central bank could launch a third round of quantitative easing (QE3) if the U.S. economy worsens. In particular, the minutes noted that “Several members indicated that additional monetary policy accommodation could be necessary if the economic recovery lost momentum or the downside risks to the forecast became great enough.” However, the Fed minutes also stated that “One participant noted the potential risks and costs associated with additional balance sheet actions.”

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