Time To Sell Gold?

Source: Bianco Research


The Financial Times – Bernanke’s QE silence a blow to gold price

The 5 per cent fall, gold’s largest daily drop in more than three years, has triggered a nervous reappraisal of the precious metal among some investors: how strong can the fundamentals of the market be, they ask, if a non-denial from the Federal Reserve chief can have such a marked impact? The nervous shake-out has continued this week with gold on Tuesday dipping below its 200-day moving average, a technical indicator closely watched by traders, for the first time since mid-January to touch a low of $1,664 a troy ounce. Many analysts and investors believe the eventual shift to monetary policy tightening by the Federal Reserve will mark the end of gold’s decade-long rally, which has lifted prices from less than $300 an ounce in 2001 to almost $2,000 last year. By promising to keep rates at zero until 2014, therefore, the Fed has pushed back the gold price peak, which many analysts had expected to come in late 2012 or early 2013. “The consensus within the Fed to extend the zero interest rate policy to beyond 2013 does, all other things being equal, imply an extension of the gold bull market,” says Philip Klapwijk, head of metals analytics at Thomson Reuters GFMS, a leading precious metals consultancy. “Maybe in the short term QE3 matters,” agrees a gold specialist at a large hedge fund. “The more important thing is that rates are on hold and I don’t think that is going to change.”

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