shopper approved
    2225.77
    25.28
    24.94
    0.16
    923.71
    15.41
    1047.81
    27.14
    banner-update21

    JM Bullion Weekly Market Review (12/20/13)

    Gold has experienced an interesting week with the Fed finally electing to taper its bond purchases. As of this post, gold prices are consolidating after yesterday’s steep declines. Markets are generally quiet across the board as pre-holiday trade has already begun to take hold. In addition, now that the FOMC meeting is over, the implied volatility in markets is draining and we could now be settling into some sideways trade through the holidays.

    The Fed this week announced plans to begin tapering its bond purchases by $10 billion per month. This move was not at all unexpected however, there was a lot of debate going into the announcement on whether or not the Fed would potentially rock the boat in markets right now. Many had been bracing for a sell off in stocks and other risk assets however what occurred was quite the contrary-stocks ripped sharply higher on the news.

    It seems that investors are perhaps feeling better about the overall economy. The Fed apparently agrees otherwise they likely would have continued to hold off on tapering. Clearly, the notion of tapering is old news at this point, and investors have had plenty of time to digest the idea of the Fed beginning to remove the punchbowl. Stocks and risk assets could continue to move higher into year’s end and possibly beyond, and this could take away from gold’s appeal as investors continue to seek higher potential returns elsewhere.

    Gold’s reaction to the FOMC on Wednesday was somewhat muted. The market seemed undecided about how to react to the news-possibly because it has had so much time to prepare. The gold market did appear unhappy on Thursday however, as prices slid dramatically and got as low as the $1186 level.

    The June lows at the $1182 level have remained intact thus far, and this area is of key technical importance right now. If this level can hold, we could see short covering in gold and a possible rally begin. If this level is breached however, it could set the stage for another significant leg lower in gold prices. In fact, a breach of this area could take prices to sub-$1000 levels that have not been seen since 2009. While many might consider this unlikely, it is certainly a possibility. It would seem that the equities markets may hold the key for gold in the near future. As long as equities continue to move higher, gold may have a tough time gaining any footing. Should a large scale correction begin to occur in stocks at some point however, it could set the stage for a sustainable rally in the metal.

    Disclaimer: All Market Updates are provided as a third party analysis and do not necessarily reflect the explicit views of JM Bullion Inc. and should not be construed as financial advice.

    Top Stories

    Read More

    Subscribe to JM Bullion’s newsletter to receive timely market updates, sales and giveaways.