Download now: Gold and Silver Mining Stocks

Gold Jumps After Fed Announces More Easing

Boundaries Detailed for Easing

Written by Swagato Chakravorty
Posted December 13, 2012 at 5:51PM

Yesterday, the Federal Reserve made an important decision—it will keep short-term rates at 0.25% until the unemployment rate hits 6.5% or falls below that. Also, the rate of inflation will govern short-term rates; until inflation touches or goes over 2.5%, rates will remain at 0.25%.

That means the Fed will also continue buying $45 billion in long-term government bonds each month, but by the end of the year, it will no longer sell similar amounts in short-term Treasury notes.

This hurts the dollar, of course, but it also meant gold shot up. Futures for February rose 0.5 percent to stabilize at $1,717.90/oz on the New York COMEX, but it went as high as $1,725 directly after the Fed’s announcement. Compare that to pre-announcement levels of $1,712.40.

The surprising thing about the Fed’s announcement wasn’t the fact that stimulus action is going to continue; it’s that the Fed tied unemployment and inflation together. Analysts were quick to indicate that all this means the dollar will remain weak well into 2013, while gold will remain strong and possibly gain in the same period.

From MarketWatch:

The continuing Fed policy of quantitative easing “will further weaken the U.S. dollar and support gold well into 2013, with volatile trading patterns along with profit-taking periods as well,” said Jeffrey Wright, managing director at Global Hunter Securities.

At the same time, the Fed predicted that the unemployment numbers would stay between 6.8% and 7.3% through 2014, USA Today reports.

Key interest rates, based on this projection, are expected to remain stable at their present level right until mid-2015.  



Related Articles

Buy Dips in Gold
In the end, large-scale gold purchases by central banks can't help but build the bullish case for all precious metals, especially gold, over the next decade or two.
Silver and Gold, Silver and Gold
What does velocity have to do, have to do with it? The Hammer talks about a new bull market in gold and silver.
Don't Sell Gold
Christian DeHaemer explains why gold is soon to be money under new secret, international banking rules. Only 92 days remain before this goes into effect...


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
Texas Gold Depository
Guaranteed Returns in Cotton Futures!
Uncle Sam's $5 Billion Cotton Scam
Investing in Rhenium
More Valuable Than Oil and Gold Combined!
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?
The Best Reason to Buy Silver
A Long-term Outlook for Silver