The US Federal Reserve surprised a large number of speculators today by tapering the Quantitative Easing program by $10bn a month. The policy making committee feel the US job market is stabilizing and have stuck to their promise not to reduce bond buying until the employment was down to seven per cent.
The modest reduction in QE may only be a token gesture, but the immediate response was positive. The stock market as a whole rallied by 184 points. Gold sales initially dropped before recovered slightly before settling on £23.45 in the UK, a deficit of -1.87% from yesterday.
How does QE affect gold spot prices?
Gold prices have tumbled some 26 per cent this year, most notably in July when the US Fed first announced it would taper its bond buying programme. QE has been something of a black cloud over the precious metals market and will keep it at bay until the central bank´s finally stop bond purchases.
With the US economy showing healthy signs of recovery, and a rapidly improving scene on the employment front, this may be the start of the Fed´s gradual winding down of stimulus, in which case we should expect to see the US strengthen pushing gold spot price lower.
This means that now – and possibly the next year – is going to be a great time to buy gold and build your precious metal portfolio. The majority vote in trade circles is to continue buying gold as they believe the bond cuts are so trivial a gold safe haven is still required to hedge investments
Traders know that gold is a solid long-term investment and should always be included as part of your investment portfolio. Gold spot prices always enter a bull market at some point, and the next one is expected to hit some time in 2015. That gives investors enough time to build up the stock and make a killing further down the line.
Other interesting points to extract from investing strategies is that bank´s are moving away from purchasing paper gold in favour of physical gold. For the past few years, central banks have been stockpiling gold and countries such as Russia and China are buying huge quantities.
The buying trends suggest investors suspect something is on the horizon and that gold will enter a bull market which will see gold prices soar and spark a gold rush. If you are prepared already and have purchased reasonable quantities of gold whilst spot prices are low, you can make a tidy profit in as little as just over a year.
To get the latest gold prices, check out coininvest.com and add precious metals to your investment portfolio today.