Gold Up In Asia After Summers Exits Fed Race – Dovish Yellen Gold Positive

by GoldCore
Today’s AM fix was USD 1,314.75, EUR 984.83 and GBP 825.17 per ounce.
Friday’s AM fix was USD 1,308.25, EUR 984.46 and GBP 827.12 per ounce.
Gold rose $0.20 or 0.015% Friday, closing at $1,323.20/oz. Silver climbed $0.36 or 1.65%, closing at $22.19. Platinum surged $23.05 or 1.6% to $1,450.75/oz, while palladium rose $9.50 or 1.4% to $699.00/oz.
Gold and silver bullion both finished down for the week at 4.7% and 6.8%. The sharp price falls came despite no major economic data, news developments or significant news regarding physical supply and demand.
The sharp losses seen last week appear to be primarily due to speculative paper selling of futures contracts leading to further technical selling as stop loss orders are triggered. There has been no marked decrease in global physical bullion demand or significant physical selling of any note in recent days.

Gold in USD, 2013 Year to Date – (GoldCore)
Gold and silver futures surged 2.1% and 3.6% respectively and the dollar fell on the open in Asia prior to determined selling which again capped precious metal prices. Analysts and media attributed the price gains on the withdrawal of Larry Summers from the race to be the new Fed Chairman, leaving Janet Yellen as the new frontrunner.
Yellen is known to be very dovish, favouring ultra loose monetary policies, even more so than  Bernanke. Therefore, her appointment would be gold and silver bullish, as ultra loose monetary policies and currency debasement will continue.
Yellen’s appointment would also be bullish for risk assets such as stocks and for bonds in the short term. Stock futures and stocks in Asia and Europe have also risen on the development.  Yellen was Obama’s favoured successor since he became President and she is favourite with the bookies including Paddy Power. Outside contenders are Timothy Geithner, Donald Kohn and Roger Ferguson.
The Fed may announce tapering this week. Should the Fed taper and reduce QE from $85 billion by $10 or $15 billion, it would be negative gold in the short term but bullish in the medium and long term.

(Deutsche Bank, Bloomberg Finance)
The Federal Reserve and Bernanke have been suggesting for months, indeed years, that they would return to more normal monetary policies by reducing bond buying programmes and gradually increasing interest rates. ‘Talk is cheap’, ‘actions speak louder than words’ and it is always best to watch what central banks do rather than what they say.
Near zero interest rates and the huge bond buying programmes are set to continue for the foreseeable future. Precious metals will only be threatened if there is a sustained period of rising interest rates which lead to positive real interest rates. This is not going to happen anytime soon as it would lead to an economic recession and possibly a severe Depression.
Yellen favours a continuation of zero interest rate policies (ZIRP), which is as important if not more important than ‘tapering’. Yellen said in December 2012, that early 2016 may be a more realistic time to start increasing interest rates.

Gold in USD, GBP and EUR Before and After Lehman Brothers Crisis
Some investors will be concerned that Yellen underestimates the risk to the dollar and of inflation and will further contribute to the debasement of the dollar which will lead to further inflation hedging and safe haven demand for gold.