In response to concerns that the Federal Reserve might start scaling back its monetary stimulus efforts in the coming week, the Gold price continued its downward trend in afternoon trading, ending the day with just over a $30 drop. According to Naeem Aslam, chief market analyst at AvaTrade, “The odds for a December tapering are at [their] highest level, as the economic data completely warrants for it, and the scale has tilted further [Thursday] after the retail sales data.” Federal Reserve officials are scheduled to meet next week to discuss the future of the central bank’s quantitative easing program. Because the program is believed to have put a drag on the dollar and given a boost to the price of Gold, the possibility that the program will start tapering has pressured Gold’s performance. However, Aslam added, “Gold is also an inflation hedge, and given that the interest rate are expected to stay lower for an extended period of time, tapering is somewhat already getting priced in.”
Along with Gold, the rest of the market seemed to throw a “taper tantrum” today, with selloffs of stocks and bonds pushing both the Dow and the S&P 500 down. Janney Montgomery chief investment strategist Mark Luschini sees the current work by Congress to come up with a budget deal as helping fuel the belief that the Fed will taper its monetary efforts starting next week. Luschini said, “These things collectively are setting up the Fed to not have to defer to prospects of fiscal impasses and weak economic data.”
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