Following the announcement by the Federal Reserve’s Federal Open Markets Committee last week, there was a 4.3 percent gain in the gold market, making it the best week for gold in the past three months. Posted by James Randolph on February 01, 2012
Best Week for Gold in Three Months
February 1, 2012 – Following the announcement by the Federal Reserve’s Federal Open Markets Committee last week, there was a 4.3 percent gain in the gold market, making it the best week for gold in the past three months. It has already been a good year for gold in 2012 with the US Mint breaking records for precious metals sales and the gold price rebounding to over $1,600 after a correction in December brought the price to the $1,500 range. The strength of the gold market showed itself strongly with a New Year’s rally that consolidated into a bona fide return to a primary bull market after the price of gold broke through the 200 day moving average in the second week of the month and kept going.
Then, last week, the Federal Open Markets Committee publicly announced that the Federal Reserve would keep interest rates low through the end of 2014, furthering its previous projections of low interest rates through mid-2013. A low interest rate policy has traditionally been very good for gold and for the gold price as it prohibits strength in fiat currencies and encourages investors to move to tangible commodities. There is little to no incentive in keeping your assets stored in dollars that are continually losing value and which earn the lowest possible interest rates. This is the current situation facing the holders of dollars in the world and the situation facing Americans who will literally watch their savings further evaporate in terms of real value.
Due to the continuation of this policy by the Federal Reserve, it is guaranteed that at least through 2014 we will see an inflationary climate in which the value of the US Dollar will, unfortunately, decline. At the same time, however, the valuation of real things, or tangible commodities in market-speak, will rise concurrently. The most popular, famous, and historical of all tangible commodities is gold, and, as the gold market is proving now, it will make the biggest and best gains during this time period.
The price of gold ended last week very comfortably in the upper $1,700 range and began the week with apparent support at that level, though some support was lost in overseas trading. The initial reaction of gold to the announcement by the Federal Open Markets Committee should be a very strong indication to any who own gold or are looking to buy gold now that the policy of the central bank in the United States will ensure gains in the gold market through 2014.
Senior Staff Writer – Certified Gold Exchange