Gold Surges 4.3% As $1 Trillion QE Per Annum, Debasement Continues

Today’s AM fix was USD 1,363.50, EUR 1005.90 and GBP 848.15 per ounce.

Yesterday’s AM fix was USD 1,299.75, EUR 973.16  and GBP 813.97 per ounce.

Gold climbed $56.40 or 4.3% yesterday, closing at $1,366.30/oz. Silver rose $1.37 or 7% to $23.09/oz. Platinum was up 3% to $1,460/oz, while palladium rose 1.7% to $715.75/oz.

Gold had its biggest one day jump in four years surging 4.3% as the US Federal Reserve surprised many market participants by continuing its extraordinary debt monetisation programme at the massive $85 billion a month ($85,000,000,000 per month) or $1.02 trillion annualised.

Gold In USD and All Federal Reserve Banks Total Assets - 1996 to Today (Bloomberg)

This morning, gold spiked to $1,376/oz in early trading in London, prior to profit taking and sellers pushed gold a few dollars lower after yesterday’s $53 surge.

Zero Hedge noted that gold’s price move higher commenced some 3 minutes prior to the FOMC minutes being released, suggesting that certain entities had advance knowledge of the no taper FOMC announcement.

Gold and silver surged 4.3% and 7% respectively as investors are concerned that the Fed's decision suggests that the U.S. economy is much weaker than believed and that continuing currency debasement will lead to inflation.

Ben Bernanke, who will exit the Fed in the coming days, backed away from the guidance he gave in June and the Fed cut its growth forecast and confounded constant speculation that it would start to slow its third round of quantitative easing. Thus the speculation and erroneous predictions that gold would go lower due to tapering were proved badly wrong.

The forthcoming appointment of a new Fed Chairmanship could not be worse.

Gold in USD - 3 Day  (Bloomberg)

Goldman Sachs did another flip flop yesterday. After being very loud in bearish calls in recent days that gold would go lower in the short term, Goldman said late yesterday that the Fed decision, combined with the upcoming debt ceiling debate, leaves risks for gold to move  to the upside.

Senior Republican politicians have hardened their stance over the U.S. budget and debt ceiling, increasing the chances of a crisis.

The Federal Reserve decision to refrain from and put off indefinitely a QE taper is very bullish.

The Fed is struggling to keep interest rates low for as long as possible in a desperate attempt to prolong a very fragile U.S. recovery or non recovery in our opinion.

Money printing and debt monetisation on this scale has led to higher gold prices throughout history and will do so again.

The Federal Reserve is effectively insolvent and investors and savers should prepare for falls in the U.S. dollar, a dollar crisis and an international monetary crisis.

All Federal Reserve Banks Total Assets Quoted Value In Million - 2000 to Today (Bloomberg)

We remain confident in our long term price target, held since 2003, of $2,400/oz which is the real record high or inflation adjusted high from 1980. We believe gold should surpass the nominal high seen in August 2011, of $1,900/oz sometime in 2014 and will reevaluate our longer term price outlook then.

Alan Greenspan, Former Chairman of the Fed, said in 2010 that gold is historically one of the rare media of exchange that doesn't require any collateral or backing. To understand how the gold price is established and how best to prepare for the forthcoming falls in the U.S. dollar download our Comprehensive Guide to the Gold Price.


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