Gold futures and ETFs were among the few bright spots on an otherwise dismal Wednesday morning. The Dow Jones Industrial Average fell over 200 points at the open and continued to decline as investors processed pessimistic statements from the Federal Reserve.
Yesterday, the Fed announced that it would buy long-term U.S. Treasury debt with the principal payments on its mortgage-backed bond portfolio. This essentially keeps the Fed’s balance sheet constant, neither expanding nor contracting it.
In a statement, the central bank said “the pace of recovery in output and employment has slowed in recent months. Household spending is increasing gradually, but remains constrained by high unemployment.”
Shrinking yields on government debt and fear about the general state of the economy benefited the goldbugs, as they saw the futures contracts on the yellow metal rose 0.76 percent to $1,207.10 per troy ounce.
Gold has been relatively volatile after touching record highs earlier in June; for weeks, it struggled to regain the $1,200 per ounce level.
But with inflation threatening on one side – the Fed has added over $1 trillion in liquidity, after all – and deflation on the other, some see gold as a haven.
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