Gold Price & Rand Exchange Rate Fail To Shine But Losses Limited For AUD NZD & CAD On QE Cut

Modified: Friday, 20 December 2013 11:07 BST - Written by James Fuller

STORY LINK Gold Price & Rand Exchange Rate Fail To Shine But Losses Limited For AUD NZD & CAD On QE Cut

The wholesale market price of gold dropped to below the $1,200 per troy oz. threshold during yesterday’s trading session as investors shifted out of the precious metal following the US Federal Reserve’s decision of Wednesday night to cut its asset purchase scheme. The move lower for gold on the day now means that the ultimate safe haven has given up almost a third of its value during 2013.

The biggest loser in the currency markets during yesterday’s afternoon session was the Rand, due to South Africa’s continued dependence on exports of the precious metal. The dip in support for the South African unit sent the Pound to South African Rand exchange rate up to as high as 17.0797 on the day, leaving the pair firmly within striking distance of its multi-year high of 17.2722 which it last touched on the 5th December.

Elsewhere, the Commodity Dollars clawed back some of the losses which they incurred in the immediate aftermath of Wednesday evening’s Federal Reserve policy announcement. The stabilisation of support for AUD, NZD & CAD was partly driven by the Fed’s insistence that domestic interest rates will remain low into the long term in the US even if domestic joblessness continues to fall.

The Fed had previously suggested that, inflationary pressures permitting, it would begin raising its key lending rate when the overall level of domestic joblessness dropped to 6.5%. The US central bank’s apparent de-coupling of monetary policy and the US labour market helped global shares record decent gains in the 36hrs following the announcement.

However, it seems that the dovish commentary which accompanied the Fed’s decision was motivated, at least in part, by the market’s reaction to Fed Chairman Ben Bernanke’s suggestion back in May that QE tapering would begin this year. World stock markets haemorrhaged support following Bernanke’s words and Fed policymakers were demonstrably shocked by the effect which they had reeked on investor sentiment. If 2014 brings further cuts to QE, then the men, (and women), of the Fed may only be able to sugar the pill for so long.

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