Gold price hovers around $1730 as all eyes are on Bernanke… again

The gold price has managed to hold onto the gains over the past 3 weeks but is finding it a bit sticky to get through $1730.

Gold $:

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In terms of €s the gold price is right at its all time highs.

Gold €:

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In terms of £ gold £1080 marks the level that we’ve been hovering around.

Gold £:

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So what is the cause of this breather in the recent gold rally? That’s right you guessed it, everyone is once again waiting on what Ben Bernanke will come out and say this thursday.  If ever you needed and example just how broken the markets are its a week like this one.

Everything, and we really do mean everything, is all hinged on what action the central bank may or may not take. They are simply the only game in town, and have been for the past 5 years. It’s just that as this crisis has gone on this fact has become more and more obvious.

So what can we expect on thursday? The general view is that the Fed will announce something in the way of new money printing. At the very least we’ll probably get an extension of the ‘exceptionally low’ interest rate guidance out to mid-2015 – which will mean that interest rates will be zero for 6 years.

But the thing that you should really keep a keen ear out for is if they do anything with the interest paid to bank’s on excessive reserves, something we’ve talked about before here (well worth taking a look at to see the importance of this).

If the Fed does announce a cut or an abandonment on the current regime of paying interest on excess reserves then watch out because the wall of money that will be thrown in the system will be overwhelming. Which is why many say that the Fed won’t do it. Whilst we get the argument that any sane person wouldn’t contemplate releasing those reserves into the economy and blowing up the money markets (just like what has happened in Europe) it wouldn’t be the first time the Fed has hit the ‘insanity’ button when it comes to monetary policy. In fact when it comes to making poorly judged and woefully understood money printing policy actions the Fed is in a league of its own.

Related posts:

1. Gold price holding around the $1655 level as GFMS gold survey eyes $2000
2. Central bank eyes merits of gold
3. The gold price looking to close at a 7 week high after Ben Bernanke say’s he’s ready to print
4. Gold price back above its 200 daily moving average – thank-you Mr Bernanke
5. Gold price steady ahead of Ben Bernanke’s Jackson Hole speech

Link to this article: : http://www.goldmadesimplenews.com/gold/gold-price-hovers-around-1730-as-all-eyes-are-on-bernanke-again-7859/

Posted by Thomas Paterson on Sep 11 2012. Filed under Gold News, Mining. 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.