From Adrian Ash<\/p>\n
\nBullionVault<\/a><\/p>\n \nAs Emerging Markets & US Investors Fear “Credibly Reckless” Fed<\/strong><\/p>\n \n <\/strong><\/p>\n THE PRICE OF GOLD <\/strong>retreated from an overnight rally to $1360 an ounce in London on Tuesday lunchtime, slipping back as European stock markets rose for the second day running.<\/p>\n \nThe Euro jumped above $1.40 on the currency market following stronger-than-expected German manufacturing data.<\/p>\n \nSterling fell hard on weak UK construction figures, however \u2013 taking the gold price in British Pounds back to Monday’s 1-week high of \u00a3851 an ounce \u2013 while crude oil rose together with major-economy government bonds.<\/p>\n \nSilver prices sat tight around $24.80 an ounce.<\/p>\n \n“Since seasonality points towards a higher gold price during November,” says technical analyst Axel Rudolph at Commerzbank today, “we believe that any corrections will be shallow.”<\/p>\n \nShorter-term, he expects spot gold “to fizzle out” near last month’s all-time high of $1387, but “The psychological $1500 level…remains our medium-term upside target.”<\/p>\n \nAhead of “the most important week ever” as one wholesale bullion dealer jokes in a note today, exchange-traded investment in gold shrank by 1.5% according to the latest data analyzed by the VM consultancy here in London.<\/p>\n \nToday’s mid-term US election results are followed tomorrow by the Federal Reserve’s hotly anticipated monetary policy statement, plus interest-rate decisions in the UK and Eurozone on Thursday, and closely-watched US jobs data on Friday.<\/p>\n \nLast week’s “strong profit taking” by institutional traders in US gold futures contrasted with “strong buying” in Tokyo’s gold derivatives market, says VM in its weekly report for ABN Amro bank.<\/p>\n \nThe world’s biggest exchange-traded gold ETF \u2013 New York’s SPDR Gold Shares \u2013 ended Monday night unchanged from last week’s 5-tonne drop, holding some 1293 tonnes of bullion to back the trust’s shares.<\/p>\n \n“Some level of QE has been built into the gold price,” reckons HSBC metals analyst James Steel, who last week forecast that gold prices may dip on a strong Republican win in today’s mid-term US elections.<\/p>\n \n“If we don’t get QE [from the Fed on Tuesday], then the market will pull back,” Steel says. “A more gradualist, modest approach will keep the gold market steady, slightly higher.”<\/p>\n \nFifty-three out of 56 economists surveyed by Bloomberg News expect the Fed to re-start its asset purchase program (aka QEII) on Wednesday, with 29 respondents expecting $500 billion of money creation or more.<\/p>\n \n“The more the West pursues quantitative easing, the more the emerging world, via capital controls, will pursue quantitative tightening,” says Stephen King, chief economist at HSBC.<\/p>\n \nThe Reserve Bank of Australia today surprised analysts by raising its short-term lending rate from 4.50% to 4.75% \u2013 a two-year high \u2013 while India’s central bank raised its interest rates for the sixth time this year, again citing strong inflation.<\/p>\n \nIn China, “the current money supply is very high,” said People’s Bank advisor Li Daokui today, warning that “inevitably [it] will bring about systemic financial risks” as ultra-loose US policy drives speculative flows worldwide.<\/p>\n \nUS investors should “scour every segment of the bond market and the globe” said Pimco strategist Tony Crescenzi to Bloomberg TV on Monday, because they “can’t depend on price appreciation…in Treasuries.”<\/p>\n \n“I think a 20% decline in the US Dollar is possible,” said his colleague Bill Gross \u2013 founder and head of the Pimco bond-fund group \u2013 to Reuters yesterday.<\/p>\n \n“When a central bank prints trillions of dollars of checks, that is a debasement.”<\/p>\n \nChina’s M2 measure of the money supply swelled by 19% year-on-year in September according to the latest data.<\/p>\n \nTurkey’s financial regulator, SPK, today launched an inquiry into whether comments from emerging-markets investor Mark Mobius of Templeton Asset Management led to a one-day drop of 3% in the Istanbul stock market last week, after he forecast a 15-20% pullback by year’s end.<\/p>\n \nBack in the US, meantime, “If I were Bernanke,” writes the Fed chairman’s former colleague at Princeton, Nobel prize-winning economist Paul Krugman, “I’d…announce a fairly high inflation target over an extended period…something like 5% annual inflation over the next 5 years.<\/p>\n \n“It’s crucial to understand that a half-hearted version of this policy won’t work…The Fed needs to credibly promise to be irresponsible.”<\/p>\n \nAdrian Ash<\/p>\n \nBullionVault<\/a><\/p>\n \nGold price chart, no delay<\/a> |\u00a0\u00a0 Buy gold online at live prices<\/a><\/p>\n \nFormerly City correspondent for The Daily Reckoning in London and head of editorial at the UK’s leading financial advisory for private investors, Adrian Ash<\/strong> is the editor of Gold News<\/a> and head of research at BullionVault<\/a> \u2013 winner of the Queen’s Award for Enterprise Innovation, 2009 and now backed by the mining-sector’s World Gold Council<\/a> research body \u2013 where you can buy gold today<\/a> vaulted in Zurich on $3 spreads and 0.8% dealing fees.<\/p>\n