Wednesday, June 24, 2009

Today in Gold: Wednesday, June 24

Each weekday, Cash4Gold will troll through the web's gold banter and post some of the bigger or more interesting stories. Following is a run-down of today's features:

"U.S. Markets Wrap: Treasuries Fall on Fed Action, Dollar Rises"
Author: Liz Capo McCormick and Margot Habiby

Main Points: Gold for August delivery rose $10.10 to finish today's session at $934.40 an ounce. Stocks rose, oil fell and the dollar strengthened against the euro, conditions that do not typically favor the price of gold.

The Fed also announced that they expected inflation to remain "subdued for some time." Since gold is seen as a hedge against inflation, this would not be seen as good news for gold investors.

"Fed Chairman Ben S. Bernanke has emphasized that the central bank can successfully take back more than $1 trillion it pumped into the U.S. banking system to pull the economy out of recession without stoking inflation."

Analysis: Very odd day. The environment was perfect for a dramatic drop in the gold price. The dollar is strong, oil is down, riskier stocks are up, and the Fed makes a declaration that there was minimal inflationary risk.

Why did gold rise? It could be that investors had little confidence in the Fed's pronouncement. Even so, the other factors mentioned would typically result in a drop in the gold price. It could be that Thursday will see the negative reaction to the yellow metal.

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