Gold slips under $1,700 after Bernanke bathos
After opening Thursday at $1,712 an ounce February gold contracts had fallen by more than 1% by lunch time, crashing through the psychologically important $1,700 an ounce level to trade at $1,698.20.
Earlier the yellow metal traded as low as $1,691 – down $26 from yesterday's close.
Traders were reacting to gold's lackluster performance following the US Federal Reserve's radical change in its monetary policy regime.
Gold was hardly moved by news that the Fed's bond-buying program has been upped by $45 billion – bringing total asset purchases to an eye-watering $85 billion a month – and that it expects rates will be near zero until mid-2015.
In the past any mention or even a hint of increased or extended quantitative easing would send investors piling into gold. Anything to the contrary and they would run for the exits.
Now it appears that strong link is broken and gold is behaving more like other asset classes. Today it is falling in tandem with the stock market as US fiscal cliff fears continue to mount.
At the moment it is not acting like a safe haven or storer of wealth.
And it's purported qualities as a hedge against inflation?
So far that theory has not really been thoroughly tested despite US and global central banks' relentless money printing.