Gold plummets as Bernanke dashes stimulus hopes

The Fed chairman tells Congress that recent improvements in the US economy may lessen the need for further monetary easing.

By TheStreet Staff Feb 29, 2012 3:15PM

Image: Gold (© Anthony Bradshaw/Photographer)By Ross Tucker


Gold prices plunged Wednesday after Federal Reserve Chairman Ben Bernanke indicated that an additional round of quantitative easing was becoming increasingly unlikely.


Gold (-GC) for April delivery plummeted $77.10 to $1,711.30 an ounce on heavy volume at the Comex division of the New York Mercantile Exchange. Gold traded as high as $1,792.30 and as low as $1,708.40 an ounce while the spot price was sinking $70.10, according to Kitco's gold index.


Silver (-SI) also tanked, falling $2.56 to $34.64 an ounce, while the U.S. dollar index was rising 0.6% at $78.68.


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Equities gave up early gains as Bernanke suggested that improvements in the U.S. economy may lessen the need for further monetary stimulus. In his semi-annual speech before Congress, Bernanke characterized the pace of economic growth as "uneven and modest by historical standards." However, he acknowledged some improvement in the labor market and said that headwinds like Europe and a weak housing market would fade beyond 2012.


Looser monetary policies -- such as the Fed's quantitative easing -- typically help gold, as investors worried about inflation turn to the metal as a safer store of wealth.


Gold investors were taking the opportunity to lock in recent gains "in conjunction with the Fed Chairman's comments regarding monetary policy," said Jeff Wright, senior research analyst with Global Hunter Securities. "With the recent run up in gold and silver, no fund manager wants to be the 'Bag-Holder' if a true correction back to the $1,600 range occurs."


However, Wright still sees long-term value in gold. "Our thesis of gradual appreciation is still intact but with periods of volatility in both gold and silver markets. I believe longer-term investors will step in to support gold and silver if the sell off continues in the coming days."


Jon Nadler, senior metals analyst with Kitco Metals, noted that in addition to the doubts surrounding a third round of quantitative easing in the U.S., European stimulus may also begin fading.


"The ECB doled out more than $700 billion in loans to over 800 banks this morning in what may have been its last gesture of 'kindness' for a long time to come," said Nadler. "While many are calling the latest ECB operation a 'liquidity injection' that smacks of an outright gift, we would be wise to note that the amounts in question are loans and that they have a three-year shelf-life."


The European Central Bank said it lent a total of €530 billion to 800 financial institutions in Europe as part of its second round of long-term refinancing. Economists had expected the banks to soak up a sum in the €500 billion ballpark.


The morning's stock-market rally had come as investors welcomed upbeat economic news. The Chicago purchasing managers index ticked in at a reading of 64 in February, beating the forecast for 61.5 from Thomson Reuters. The index rose to its highest level in ten months, suggesting that regional business has been picking up.


The U.S. government said that the economy grew at a pace of 3% in the fourth quarter, upwardly revised from its first estimate of 2.8%. Economists had thought the growth reading would stay unchanged, according to Thomson Reuters.


Mining stocks were following metals lower. Among the biggest losers were First Majestic Silver (AG), down 4.2% to $20.85, and iShares Silver Trust (SLV), shedding 4.2% to $34.32. Novagold Resources (NG), was losing 3.7% to $8.26, and Newmont Mining (NEM) was down 3.3% to $59.93.


Let's see here---we have millions unemployed, millions kicked out of their homes, our labor force is "sold out" to communist countries,  we have an invasion by a multitude of illegal immigrants,  the national debt was increased by trillions, we have a trillion dollar deficit and no reasonable budget agreement, and fuel prices are escalating towards five dollars per gallon. 


And Bernanke sees improvement?


I know---the "improvement" occurs because all the negative crap is now incomprehensible!

Feb 29, 2012 3:37PM
Like this was not going to happen?? A lot of fake TV adds to invest in gold !!
Feb 29, 2012 4:03PM
A HUGE hit?  When it drops down to 35 bucks an ounce as it was for years when I was a kid, I'll use HUGE then.  Give me a break.  Anyone recall when Tricky Dick Nixon took us off the gold standard?  It was 1971.  A conservative president. 
Feb 29, 2012 5:58PM

Disclaimer: Wall Street propaganda found at MSN Money is for amusement purposes only.

Pay no attention to the man behind the curtain.

Feb 29, 2012 4:55PM
Bernanke Bernanke Bernanke,just go away already.
Feb 29, 2012 5:42PM

This is typical. A big over reaction to a non story. Just because Bernanke is not touting QEXV, gold tanks. I guess everyone has forgotten the trillion dollar deficits as far as the eye can see. Nothing fundamental about the dollar's future has changed. Those who don't see the galloping inflation coming will be blindsided by it and it will damage the stock market big time.

Gold is still your only defense against the destruction of our currency.

Feb 29, 2012 5:55PM
Ah, just more BS, from BB, to help BO ! Audit, the eliminate the FED !
Feb 29, 2012 5:05PM
how long before we sell our gold and silver for yen and rice thanks to our politicians for all of their support and help
Feb 29, 2012 6:33PM

Why is it that when I read anything written about the economy improving, the unemployment rate falling, etc., I always hear Kevin Bacon screaming "ALL IS WELL!!" while being trampled in a riot in the movie "Animal House"?  


I think we should elect Lewis Black as President. He said...


"The Democrats are the party of no ideas and the Republicans are the party of bad ideas. A Republican will stand up in front of Congress and say "I'VE GOT A REALLY BAD IDEA!!", and a Democrat will immediately jump to their feet and declare,  "AND I CAN MAKE IT SHI**IER!".


Feb 29, 2012 5:41PM
Further evidence of Socialism creeping in. Pre-election propaganda is a trademark characteristic of communism, oops, I mean socialism. Implying to the subjects that things are getting better is a out-right lie! Millions out of work, monetary policies to drive more out of work, rising prices for consumer staples including fuel, food, and utilities (heat, water & lights) are not signs of improvement. Wake up America! Stop believing the BS and start behaving as true Americans...fighting​ for what you believe, liberty, and the persuit of happiness.
Feb 29, 2012 6:48PM

I am 75 and My wife is 73 we parked my GMC Yukon and herCad  ,and started riding our bikes  . If we could get 25% 0f regular drivers to do this for 90 days ,gas prices could fall $1,and the market could go up $100.WE the people CAN change what is happing to us I.Iove the U.S.A. How about ,YOU ALL.

Feb 29, 2012 5:47PM
2 out of 100 companies might be hiring and the liberal media will be sure to post those companies all over the news to make it look like the economy is turning around.  This country is so pitiful yet where else is there to go? 
Feb 29, 2012 6:53PM

You cannot starve off what has already been created and is in motion...that is ...inflation. One would be wise to hold onto their precious metals to hedge the turmoil that has already begun. There's a lot of loose money out there that going to come home to roost....more and more as prices go higher and higher with dollar devaluation.

Oh, I have the the best seat in the house...I see everything.

Feb 29, 2012 6:37PM
Huge hit should come to the Fed and Bernanke. They have done absolutely nothing in the years since they were created except to issue lame statements that the Wall street clowns salivate over or conversely go into state of abject terror and panic.
Feb 29, 2012 4:41PM
Feb 29, 2012 5:48PM
Took a huge hit, eh?
Okay, if you say so.
April 2008 when it became apparent we were going to elect a  quasi socialist to the white house, either Clinton or Obama, I cashed everything out, and bought gold.
Obama can't tax it, until, I sell it and it will stay in gold until the inept lying quasi socialist in the white house is an esoteric historical foot note..
I bought it at $434 an ounce, you handouters will pardon me if I hang on to it a while longer.
Lot of people bought gold as soon as it became apparent, we were going to elect a quasi socialist, so if Obama is reelected, , almost certainly the scum bag will try to make private ownership of Gold illegal, like the other quasi socialist, Roosevelt, did..
Take physical possession of it and bury it in your back yard, leave it there till the megalomaniac in the white house is sent back tho the garbage pile in Cook County, Il.

Feb 29, 2012 5:43PM
Man, I'm glad I sold my gold teeth and bling a week ago, so I could buy gas for my Ford F250, 4 wheel drive, super charged, extra cab, delux truck.
Feb 29, 2012 7:06PM

When you see a barrage of gold selling adds on the tube like what has been going on for the last three months, you know you have completely missed the boat to buy gold and make a near term profit. Don't think for a moment that gold was not manipulated to make very large investors rich over the last 24 months and all the smart money makers got out of the gold market around 1600 & 1650 knowing it would fall. I bought a lot of silver over the last 60 months because it's been a better bang for the buck vs.  troy ounce of gold and I have sold most of it off for a very nice profit as soon as it ticked  up to30

My advice for Precious Metals..AU.Ag.PT. Pd and Rhodium, lay low until after 1st qtr 2013 and then re assess.

Feb 29, 2012 5:08PM
wow!!! like this is a new happening!!! what goes UP will ...... well you get it.....
Feb 29, 2012 7:55PM
Half of 1 % is a "huge hit" "gold prices plunged" "gold PLUMMETED" ?! Who writes this crap?
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