Gold Prices Drop Despite Shutdown Preventing FOMC from Tapering Asset Purchases

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Gold Prices Drop Despite Shutdown Preventing FOMC from Tapering Asset Purchases

Gold Prices Drop Despite Shutdown Preventing FOMC from Tapering Asset Purchases


The wind might be howling and the days getting shorter but there's a bright and cheery mood across the City of London at the moment and any number of factors could be driving it.

The economy is growing again, the list of companies wanting to list in London keeps getting longer and bankers are no longer public enemy number one after years at the top of the chart; the energy bosses can well and truly claim this prize now.

George Osborne has certainly had a smile on his face since returning home from his Chinese PR trip to news that the British economy grew by 0.8% in the third quarter, building on the 0.7% growth achieved in the second.

It was the strongest rate of expansion since 2010 and heralded the 'path to prosperity' according to the Chancellor.

UK Growth Improves but Cost of Living Rises

Despite growing optimism, senior economists I know tell me that Britain has a long way still to go because the economy is smaller than its pre-crisis peak.

That said, Britain's services sector, which accounts for three quarters of the economy, is now bigger than before.

I'm told that a strengthening recovery is likely to reduce government borrowing projections for this year, providing Osborne with further reason for cheer.

In the absence of a major shock, my City friends say the prospect of more quantitative easing is ever diminishing, while financial markets are not pricing in an interest rate rise until 2015.

Not everyone is happy across the country though and households continue to struggle with the rising cost of living.

Intense debate over energy prices in particular is shaping up to be one of the key battle grounds for politicians as the next election creeps closer.

As I said before, it's almost certainly easier to be a banker at the moment, unless you work for the Co-op of course.

Gold Fails to Capitalise as FOMC Hold Off Tapering

Across the pond, the drama caused by the fiscal shutdown perhaps shows that the Federal Reserve was wise not to taper asset purchases at its Open Markets Committee meeting in September.

In theory, this should be positive for the gold price, because the extra liquidity supports precious metal prices.

However, the price of the precious metal has failed to take off again and it remains around 20% below the level seen a year ago.

Investors appear to be pricing in the end of its decade-long bull run and I reckon they're right to do so.

Oil Slips Back but Chinese Car Sales Should Boost Demand

The oil price has eased back from its Syria and Egypt induced highs, but it is unlikely to fall significantly over the next few months.

One piece of news I heard recently also made be very bullish on the price in the medium term.

In September, China overtook America as the largest buyer of oil on the international markets and this is set to continue, led by an increasing number of private cars on Chinese roads.

The China Association of Automobile Manufacturers is predicting total vehicle sales will pass 20 million units this year for the first time.

This trend is only going to accelerate.

Until next time...




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