Gold path dictated by tapering psychology
LONDON (Sept 25) Gold futures advanced as the latest hints provided by Federal Reserve (Fed) officials highlighted mixed opinion on September's central bank decision. As the market waited for any reduction in quantitative easing (QE), the disappointment from unchanged monetary expansion was visible on the market.
Futures of the precious metal were seen elevated, trading 0.53% higher at $1,323.40 as of 12:08pm BST, waiting for the next crucial move of the Fed to show the credibility of members' comments.
Silver futures advanced 0.62% to $21.720 as of the same time, mostly following the path of the golden commodity.
Despite the fact that 'Septaper' failed to materialize and brought a bullish rally on precious metals' market, investors count with the QE reduction till the end of this year and capped the bullish pressure with a downward outlook.
Fed's representatives react to unchanged policy
Kansas Fed President Esther George, suggesting tapering to $70 billion at the beginning of the September, was always a critic of larger monetary expansion. On Friday she added that the current decision could hurt the credibility of the central bank.
The same stance came from Dallas Fed President William Fisher, openly declaring his dissent with the resolution. "I disagreed with the decision of the committee and argued against it," he stated on Monday. He confirmed a negative impact on the credibility of officials.
Conversely, St Louis Fed chief James Bullard was a supporter of the program, informing that the 'no change' was a 'close call.' A smaller amount of reduction was possible.
New York Fed boss William Dudley, who voted for maintaining the size of the QE program last week, said that the Fed has to "forcefully" combat headwinds from ongoing fiscal sequestration, higher taxes and interest rates.
The New York Fed chief wanted to see further evidence of an improving labor market and economic momentum that will guarantee further job gains. "So far, I think we have made progress with respect to these metrics, but have not yet achieved success," he said.
