Download now: Gold and Silver Mining Stocks

Gold Falls on Fed Inaction

Major Drop Amidst Global Economic Doom

Written by Swagato Chakravorty
Posted June 22, 2012

Gold fell 2.5% on Thursday in the biggest 1-day drop since February after the U.S. Federal Reserve's monetary policy meeting ended in an extension of “Operation Twist,” a decision which failed to quell fears of an economic slowdown. This 2.5% was enough to nearly destroy all gains in gold for the year to date, Reuters reports.

The Fed's Wednesday meeting resulted in a decision to continue lowering interest rates instead of installing an anticipated new round of monetary easing. A gold selloff followed and prices were down to $1,566 an ounce by 3:05PM EDT, reducing the precious metal's security against inflation.

Just last year the price hit a record high of $1,920.30 per ounce, and earlier this year the Fed's promise of low interest rates brought it up 15%. The Fed's inaction, however, has reversed this climb. Silver was also down 4% to $26.90 an ounce on Thursday.

New data was also released showing anemic American manufacturing, a consistently-contracting Chinese factory situation, and the continuing euro problems, contributing to intensifying deflation worries. The new numbers further increased market apprehension of a global economic slowdown.

Jeffrey Sica, chief investment officer at SICA Wealth Management LLC, commented:

“When you see slowdown in China and in the United States and the debt crisis accelerate in Europe, it leads people to believe that we will have significant depreciation, especially when commodities and precious metals prices have been so tied into the monetary policy.”

But despite the gloomy news overall, officials like Sica believe gold will recover over the long term. The instability we see now will eventually lead to what Sica called a “fear trade,” bringing gold back up once again.

The Best Free Investment You'll Ever Make

Sign up for the free Wealth Daily e-letter below.

In each issue, you'll get our best investment research, designed to help you build a lifetime of wealth, minus the risk.

By signing up, you'll instantly receive our new report: Surviving the Coming Economic Collapse.... Finding The Most Profitable Investing Opportunities For Your Portfolio.
We Protect Your Privacy

Related Articles

Gold Going to $8,500/oz
As I write this, gold futures have fallen below $1,600. We wait with bated breath as the great Fed Chairman Ben Bernanke gathers his papers and readies his announcement...
Chinese Gold
Two years ago, the Middle Kingdom said that they have 1,054 tons of gold. By comparison, the United States has 8,133 tons of gold. Chinese gold holdings would have to triple to match the U.S. vis-a-vis the ratio of gold to GDP.
Gold and Silver are Breaking Out
2012 is the Year of the Dragon. According to this year's Dragon prediction, investments will do well "with a steady income throughout the year." Gold and silver will do well, too.
Yap Has No Gold
Yap, as you well know, is a coral island in Micronesia. According to the their Tourist Bureau: "Yap is so remote it takes a two day journey by plane, but the moment you step off the airplane, a topless woman will great (sic) you with a fresh flower lei."

What is the benefit of the email subscription?
While the Wealth Daily website offers access to the articles and reports, as a newsletter subscriber you will be among the first to receive access to the valuable advice, delivered directly to your inbox daily, and you will have access to deals on our exclusive services.
Greece's Keynesian Experiment
Big Government Doesn't Work
China's World Domination
And Why it's Not Going to Happen
Should Greece Pay Its Debt?
The Case for a Greek Default
Gold's Early Warning
Deflation May Be Coming
How to Retire Like a King
5 Tips for a $1 Million Retirement
Guaranteed Returns in Cotton Futures!
Uncle Sam's $5 Billion Cotton Scam
Investing in Rhenium
More Valuable Than Oil and Gold Combined!
How to Retire Like a King
5 Tips for a $1 Million Retirement
Greece is Screwed!
10 Ways to Protect Yourself from the Global Economic Crisis
Investing in the Next Silver Bull Market
Silver Short Selling: Manipulation or Opportunity?