US FED – Bernanke Is Not a Gold Trader

Federal Reserve Chairman Ben Bernanke had a busy week testifying before Congress last week, yet the market did not get the clarity it needed regarding American QE.

After single-handedly delivering a market moving shock last month by hinting QE could be scaled back this year, Bernanke has decidedly softened his tone.

The Fed chairman stated before his testimony that there are three reasons behind the rise in long-term Treasury yields: improving U.S. economic data, the unwinding of risky positions, and changing market interpretations of Fed policy.

Bernanke faced questions about where the market was headed. Before Congress, he was asked about refinancing mortgage rates. He declined to comment and excused himself by saying he is not a financial adviser. When U.S. senators inquired about the plummeting price of gold, he stated the decline could be related to investors being less worried about the economy, before adding that “nobody understands gold prices and I don’t really pretend to understand them either.”

Bernanke’s speeches were taken as dovish, and along with soft, global economic data, it deflated tapering fears and depreciated the USD. Unemployment claims on Thursday were lower-than-expected. That could reignite the QE tapering conversation, especially if the nonfarm payrolls figure due on August 3 beats expectations and lowers the unemployment rate.

But Bernanke was adamant that there is no specific date scheduled for the tapering of QE, insisting it will be dictated by economic indicators. If the tapering process is initiated any time soon, it might be modified to ensure the economic recovery continues to gather steam. Such an ambiguous direction has only served to fuel rumours that Bernanke may not be in the driver’s seat at the Fed by early 2014.

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