Gold, Silver, Equities, Bonds Plunge On Fed Noise And China Debt Crisis Risk

Today’s AM fix was USD 1,303.25, EUR 986.34 and GBP 842.38 per ounce. 
Yesterday’s AM fix was USD 1,366.00, EUR 1,019.86 and GBP 874.91 per ounce.

Gold fell $16.10 or 1.18% yesterday and closed at $1,351.00/oz. Silver sank to $21.25 and ended down 1.25%.

Bonds, shares plus gold and silver fell sharply around the world this morning after the U.S. Federal Reserve again suggested an end to their easy money policies. Data also showed China’s economy slowing down amid growing concerns that a credit crunch in China is worsening.


Cross Currency Table – (Bloomberg)

Gold fell to a more than two-year low, while silver was at its lowest since 2010. Gold fell 2.7% and silver slumped by 4.5%.

The sell-off began after Fed chairman Ben Bernanke again suggested that U.S. economic growth was strong enough to begin tapering back on its $85 billion in monthly asset purchases later this year.


Gold in USD, 2 Year – (GoldCore)

Ten-year U.S. Treasury note yields hit 15-month highs of about 2.38% after the comments sparking a slump in global equity and bond markets. 

The FTSE fell 1.8% in early trade, while the Dax was down 2.4% and the CAC 40 down 2.1%. 

The selling accelerated when a survey of China’s factories showed activity slumping to a nine-month low just as a squeeze in the nation’s money markets sent short term rates to record highs. 

Asian stocks outside Japan suffered their biggest daily loss since late 2011, German Government bond futures dropped to their lowest levels since February and oil slumped by around $1.50 a barrel.


Gold in USD, 3 Year – (GoldCore)

Perhaps most concerning is the very sharp selloff in the UK and other European government bond markets which have seen very sharp falls.

The market slump is also due to the fact that many bond and equity markets had become overvalued despite deteriorating fundamentals.

This deterioration in the fundamentals of the global economy may be more important that the Fed suggesting that they will ‘taper’ their extremely unorthodox and massive debt monetisation programme.

The Fed has been suggesting that this would happen for many months and as ever it is always best to watch what central bankers do rather than what they say. 

Some market participants may be realising that markets, and bond markets in particular, are hopelessly addicted to ultra-loose monetary policies, the printing of money to buy bonds and currency debasement.  

Conversely, these fundamentals are actually bullish for gold and silver in the medium and long term.

The smart, store of wealth, money will continue to gradually accumulate physical bullion on dips like this.

Commercial traders, the so-called "smart money" in the futures market have twice as many long positions as they do short, as per the latest Commitments of Traders (COT) report. Meanwhile, the speculators, the so-called "dumb money" have slightly more short positions.

Considering that the commercial traders tend to be biased to the short side, this indicates they are confident that prices will soon rise.

Ignore the noise of the Fed and continue to focus on the long term fundamentals driving the precious metals market.

NEWS
Gold falls to 1-month low on Fed stimulus outlook – Reuters

India unlikely to ban gold imports or hike gold import duty – Reuters

Asian Stocks Drop Most in Two Years on Fed, China Credit – Bloomberg

Bonds, shares slump as Fed signals end to stimulus – Reuters

COMMENTARY
Video: "Get Out Of Paper Money" – Bloomberg

Video: Gold "Coming Back As Alternative Store Of Value" – Bloomberg

Man Who Oversees $150 Billion Warns Of Hyperinflation – King World News

The Dreaded “Tapering” – GoldSeek

Silver: Important Weapon Against ‘Superbugs’—Silver Institute – Mineweb

For breaking news and commentary on financial markets and gold, follow us on Twitter.

Mark O'Byrne

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