Gold price holding steady around $1730 (again) ahead of FOMC decision

After the mini-bump yesterday in gold following the German constitutional court’s decision to allow the plunder of German taxpayers to continue, the gold price has fallen back to the $1730 level where we’ve now been hovering all week. We’ll have to wait until 17:30 tonight to see what, if any, new forms of money printing the Fed has in store for us. As we’ve pointed outbefore the unofficial mouthpiece for the Fed in the press is WSJ’s John Hilsenrath. Here’s what he has to say on today’s decision:

it’s hard to say how big a program the Fed would launch, here are some guideposts:

• The Fed is already purchasing $45 billion in long-term Treasury securities every month through the Operation Twist program and it plans to buy a total of $267 billion by year-end. That marks the lower bound of what Fed purchases will be for the rest of the year

• If the Fed doubles the size of its current program by matching Treasury purchases with mortgage purchases, that would get its monthly purchases to $90 billion

• Its controversial QEII program launched in November 2010 was smaller at $75 billion per month.

• Its first round of mortgage and Treasury purchases took place largely in 2009 and was designed to be immense to address the financial crisis. It amounted to more than $140 billion per month, an amount that seems likely to be far beyond the ambitions of what Fed officials are prepared to do now.

Interestingly he also talks about something we’ve been highlighting as possible Fed action, namely reducing the interest paid to banks on excess reserves:

–WHETHER TO LOWER ANOTHER RATE: The Fed now pays banks 0.25% interest on reserves they keep with the central bank. The Fed could reduce the rate it pays on reserves that aren’t required of banks (known as excess reserves) a little bit to try to give banks more impetus to lend. However many officials are reluctant to do so because they’re afraid pushing the rate any lower would disrupt short-term lending markets. It’s unclear whether the Fed will do anything on this front, especially with so many other hard decisions on the table.

If Hilsenrath is right it would appear that Bernanke will be keeping that highly inflationary move until a later date. Gold $:

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Gold £:

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Gold €:

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Related posts:

1. Bank of England maintains 0.5% interest rates – Gold price holds steady on the news
2. Gold price falls back to $1600 ahead of Federal Reserve decision
3. Gold price holding steady as market jitters and Italian woes linger on
4. Gold price drifts lower ahead of the Fed’s decision
5. Silver price holding steady above $30 – now up 10% on the year

Link to this article: : http://www.goldmadesimplenews.com/gold/gold-price-holding-steady-around-1730-again-ahead-of-fomc-decision-7873/

Posted by Thomas Paterson on Sep 13 2012. Filed under Gold News, Markets. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.