Bernanke's incredible level of monetary support hasn't managed to spark sustainable economic growth

Adding fuel to the fire that was the first quarterly decline in U.S. GDP since 2009, the Federal Reserve confirmed economic growth stopped toward the end of the last year. The Bernanke Fed also made it clear that it plans to continue its latest round of quantitative easing, in which it’s buying $85 billion in Treasuries and residential mortgage-backed securities a month, and that interest rates will remain at record lows until unemployment drops. The FOMC statement also revealed the specter of disinflation; stock markets initially fell. The Fed confirmed QE is here to stay on Wednesday as they wrapped up a two-day FOMC meeting. The institution headed by Ben Bernanke will continue to purchase $40 billion in RMBS and $45 billion in Treasuries a month if “the outlook for the labor market does not improve substantially.” A troubling line in the Fed’s latest FOMC statement indicates that economic growth has stalled, a fact confirmed by fourth quarter GDP numbers which showed a 0.1% contraction in output. After blaming Hurricane Sandy for the slowdown, the Fed also revealed creeping disinflation, noting “inflation has been running somewhat below the Committee’s longer-run objective [of 2% or a little lower].” Bernanke & Co. attributed this to “transitory factors,” pointing the finger at falling energy prices. Still, the Fed made it clear it is concerned over the state of the economy. While consumption and business investment advanced and housing markets appear to be recovering, the Fed noted “downside risks to the economic outlook.” The Fed stuck to the script, once again emphasizing its new, quantitative policy outlook. The federal funds rate will remain zero-bound until the unemployment rate drops below 6.5% and inflation doesn’t run above 2.5%. According to Swiss Re‘s chief economist, Kurt Karl, the unemployment rate will fall below the Fed’s threshold next year, meaning interest rates could rise as soon as mid-2014. As has been the case recently, Bernanke faced a lone dissenter in the FOMC. In this case, it was Kansas City Fed president Esther George, who warned of QE and record-low rates’ potential to spark runaway inflation. George was following in the footsteps of Thomas Hoenig, who used to head the Kansas City Fed and had dissented consistently with Bernanke. Market reaction to Wednesday’s FOMC statement was relatively muted, with all three major U.S. stock indexes sliding marginally in its aftermath. The yield on 10-year Treasuries initially moved up, but then fell all the way to 2% by 2:38 PM in New York. Shares in major banks like JPMorgan Chase, Bank of America, Citigroup mimicked the indexes in their tepid reactions to the statement, while gold price rose to $1,682.60 an ounce. From: Forbes

Gold Pops Higher Following U.S. GDP Contraction; FOMC Awaited

From Kitco News Wednesday January 30, 2013 8:49 AM Gold prices are trading solidly higher and near the daily high Wednesday morning, in the immediate aftermath of a weaker-than-expected U.S. gross domestic product report. Some more short covering and bargain hunting buying interest are featured. The key outside markets are also in a bullish posture for the precious metals Wednesday morning, as the U.S. dollar index is lower and crude oil prices are higher. February gold last traded up $13.20 at $1,674.00 an ounce. Spot gold was last quoted up $2.30 at $1,666.75. March Comex silver last traded up $0.496 at $31.68 an ounce. Fourth-quarter U.S. GDP contracted by 0.1% on an annual basis. It is the first U.S. GDP decline in over three years. The market place was expecting the figure to be up 1.0%. The gold and silver markets popped higher immediately following the GDP report, on ideas the weak data will prompt the Federal Reserve to adhere to is very easy money policies presently in place. The two-day FOMC meeting ends Wednesday afternoon with its official policy statement to follow. Most market watchers expect the Fed to keep U.S. monetary policy unchanged—meaning continuing asset purchases and a very accommodative stance. However, traders will also be watching for any nuances that are included in the Fed statement, which could provide early clues on when the Fed will stop its asset purchases. European stocks were mostly near unchanged Wednesday, save for a weaker Italian stock market. Euro zone consumer sentiment continues to creep higher, according to the latest figures released from the European Commission Wednesday. The Euro currency continues to rally and hit a fresh 13-month high against the U.S. dollar amid better investor sentiment toward the European Union and its handling of its sovereign debt crisis. The U.S. dollar index is lower early Wednesday and hit a fresh five-week low overnight. The dollar bears hold the solid overall near-term technical advantage, which is an underlying supportive factor for the precious metals. Nymex crude oil futures prices are firmer early Wednesday and hit a fresh 4.5-month high overnight. The crude oil bulls still have upside near-term technical momentum and that, too, is a bullish underlying factor for the metals markets. It’s very possible that as Nymex crude oil prices approach the psychological level of $100.00 it would be a bullish development for the gold and silver markets as well as most other commodity markets. Crude oil is arguably the price leader of the raw commodity sector. Other U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, the ADP national employment report, and the weekly DOE energy stocks report. The London A.M. gold fixing is $1,666.25 versus the previous London P.M. fixing of $1,663.50. Technically, February gold futures bulls and bears are on a level near-term technical playing field. Prices Wednesday did push back above the key 200-day moving average. The bulls’ next upside price breakout objective is closing prices above psychological resistance at $1,700.00. Bears' next near-term downside breakout price objective is closing prices below solid technical support at the January low of $1,626.00. First resistance is seen at $1,680.00 and then at $1,686.00. First support is seen at $1,670.00 and then at the overnight low of $1,661.80. March silver bulls and bears are also on a level near-term technical playing field. Bulls’ next upside price breakout objective is closing prices above solid technical resistance at last week’s high of $32.485 an ounce. The next downside price breakout objective for the bears is closing prices below major psychological support at $30.00. First resistance is seen at the overnight high of $31.85 and then at $32.00. Next support is seen at $31.50 and then at the overnight low of $31.25.

All the Gold in the World

It is an amazing sight when visualized - This is all the gold mined in history....

Goldman Forecasts Gold Rally - 3 month target $1825

Gold may climb over the next three months as U.S. lawmakers attempt to tackle the country’s debt ceiling and the world’s largest economy slows, Goldman Sachs Group Inc. said, advising investors to place bets on advances. “We see current prices as a good entry point to re- establish fresh longs,” analysts Damien Courvalin and Alec Phillips wrote in a Jan. 18 report. The bank reiterated a three- month target of $1,825 an ounce, as well as a forecast for prices to weaken in the second half as the U.S. economy rebounds. Gold fell 5.5 percent last quarter, the worst performance since 2008, on expectations for a recovery and potential end to central bank stimulus in the U.S. An advance to $1,825 would be consistent with rallies into debt-ceiling decisions, the analysts wrote. Since 1960, Congress has raised or revised the debt limit 79 times, according to the Treasury Department. “The uncertainty associated with these issues, combined with our economists’ forecast for weak U.S. GDP growth in the first half of 2013 following the negative impact of higher taxes will push gold” to the three-month target, they wrote. Gold, which rallied for a 12th year in 2012, traded at $1,688.50 an ounce on the Comex at 5:40 p.m. in Singapore. Holdings in exchange-traded products reached a record last month, data compiled by Bloomberg show. Most-active prices last traded above $1,825 an ounce in September 2011. Borrowing Limit The Treasury has said the U.S. will exceed its $16.4 trillion borrowing authority sometime from mid-February to early March. Financing for government agencies is set to lapse March 27, and lawmakers must pass new spending or cause a shutdown. Also in March, Congress will confront the $110 billion in automatic spending cuts, half from defense, that were postponed in a Jan. 1 tax deal. Goldman restated its outlook for lower prices in the second half of this year, a call echoed by Credit Suisse Group AG and Allan Hochreiter(Pty) Ltd., as the U.S. recovers. As growth improves, prices will likely decline even with continued central bank and exchange-traded fund demand, Goldman said.

The Fed will Take 7 Years to Procure Germany's Gold

The biggest news of the day comes from the official Buba announcement that, in its official capacity as a prudent central bank, it - as first of many - is looking to repatriate some 300 tons of gold from the New York Fed. That, however, is not today's news - that was Monday's news. What is news is that courtesy of the supplied calendar of events in the Buba statement, it will take the Fed some seven years to procure Germany's 300 tons of gold. This is the same Fed that, in its own words, holds some "216 million troy ounces of gold" or some 6720 tons, in its vault 80 feet below ground level. Putting the above in perspective, the amount of gold that Germany will have to wait 7 years for is shown in red. The amount of gold the Fed supposedly holds, is shown in yellow with a shade of tungsten. Why it will take the Fed 7 years to part with an amount of gold that is less than 5% of its total holdings is anyone's guess... unless of course, the bulk of the gold in its holdings has been rehypothecated numerous times to serve as collateral for countless counterparties, and it is no longer clear just who own what to anyone.

Gold Prices Rise After Solid Economic Reports

NEW YORK (TheStreet) -- Gold prices were climbing Thursday, coming off early session lows after a round of U.S. economic indicators reported steady improvement in the housing and labor markets. Gold dropped 70 cents, or 0.04%, on Wednesday. Gold for February delivery was adding $4.30 to $1,687.50 an ounce at the Comex division of the New York Mercantile Exchange. The gold price traded as high as $1,689.70 and as low as $1,666.40 an ounce, while the spot price was adding $8.10. Gold prices on the Comex division slumped at the opening of the market, but have moved into positive territory in the first couple hours of trading. "Principally today, anyway, the better economic reports that came out of the U.S. helping the dollar, pushing down gold a little bit," said Will Rhind, managing director at ETF Securities U.S. "We've come off that low as people have stepped in to buy it." The U.S. dollar index was sliding 0.14% to $79.70, while silver prices for March delivery were tacking on 15 cents to $31.70 an ounce. Housing starts rose in December to 954,000 on a seasonally adjusted annual rate, up from November's revised 851,000, according to the Census Bureau. The Labor Department reported that initial jobless claims for the week ended Jan. 12 decreased to 335,000, which also brought the four-week moving average down to 359,250. The improving housing market has suggested greater health in the overall economy, which would suggest a move out of gold -- a safe-haven against inflation and economic uncertainty -- and into other assets. Employment reports have exhibited significant sway on the yellow metal as the Federal Reserve has tied much of its monetary policy to strength in the labor market. The Fed has reiterated its commitment to continue low federal funds rates and quantitative easing measures for as long as the labor situation exhibits soft improvement. Gold has struggled to break out of its current trading range, which may be a result of major economies -- the eurozone, China, the United States -- beginning to reach some certainty in terms of expansion.

Gold Stocks to Surge upto 90% This Year....

Gold will surge to new highs this year, a push upward that will cause a big rally in the depressed shares of precious metals miners, says John Hathaway, portfolio manager at New-York based Tocqueville gold fund. How good might it get for gold miners? Pretty stupendous, in his view. Mr. Hathaway believes that when gold starts to trade sustainably above the $2,000 U.S an ounce level, shares could run up by 60 per cent to 90 per cent. Read the full article here