Gold prices should start reflecting withdrawal of QE3

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Gold prices should start reflecting withdrawal of QE3
Gold which has had a lackluster price movement and is heading for its first drop in 12 years this year, has to now prepare for QE3 tapering and more demand destruction.

Comments coming out from within the Federal Reserve and strong economic data in the US, suggests that we are not very far from QE 3 tapering.

"July's decline in unemployment should push the Federal Reserve closer to scaling back its $85 billion-per-month in bond purchases, " Dallas Fed President Richard Fisher said recently.

Wall Street Journal quoted Fisher as saying, "I would have personally started dialing back some time ago."

Many argue that the asset purchase programme by the Federal Reserve or more popularly known as QE3 maybe tapered in the month of September. This may lead to gold prices falling in the international markets and also in India.

Over the last few days the US stock markets have fallen on fears that QE3 tapering may start in September itself. However, if not September, one can expect tapering to happen sometime in October or December.

Over the last few years most of the central banks have followed easy monetary policy and easy liquidity conditions have pushed gold prices higher.

The Federal Reserve has been buying buying assets worth $85 billion per month and lot of this has found its way into gold, which has driven prices in the last 3 years.

With the possible tapering of asset purchase programme and its complete withdrawal next year, there is certainly a possibility that gold prices could react from here.

GoodReturns.in

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