Gold price spikes after Fed hints taper would only happen in 2014

The gold price on Friday spiked more than 1% after a key member of the US Federal Reserve, hinted that tapering of the US central bank's stimulus program may be delayed to 2014.

After spending most of the week changing hands around the $1,320 level, gold December futures jumped as much as $20 immediately after the news to a day high of $1,345, levels last seen September 19 when the Fed surprised markets by keeping its asset purchase program unchanged.

Charles Evans, president of the Chicago Federal Reserve Bank, told reporters that there is "a decent chance" that the Fed may begin to taper the program currently running at a $85 billion a month clip, at the October or December meetings, but then added "it also could be at the January meeting."

MarketWatch reports it is "one of the first suggestions from a senior Fed official that a taper could be delayed into 2014."

Many observers have speculated that reductions in the Fed's quantitative easing program – set to reach a total of $4 trillion by the end of the year – may be postponed to next year for the following reasons:

  • The next meeting is a only month from now and that's probably too short a time period to gather enough "confirming evidence" that the economy is doing well to persuade Fed members it is time to act.
  • The final meeting of 2013 is in December, but that's very close to the end of Bernanke's tenure and the FOMC may not want to make such a far-reaching decision on policy amid a changeover.
  • Leaving the decision on tapering to Bernanke's successor provides a smoother transition and on top of that, the most likely candidate to take over, Janet Yellen, is considered one of the strongest supporters of QE.

SEE ALSO: CHART: $9 trillion monetary expansion not keeping gold afloat