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There Goes Gold - QE Is On The Way Out

As expected yesterday, in my piece pointing to an example of an upcoming high probability trade, a short in spot gold, the precious metal took a tumble overnight, which brought it down through the localised support the price action had developed at 1308.00 US dollars per troy ounce.

There is now a growing and well justified expectation that the US Federal Reserve will soon initiate the so-called tapering of its bond buying program, or Quantitative Easing (QE), which will have the effect of strengthening the greenback and weakening gold, as gold will no longer be needed to play the part of a hedge against a depreciating USD.

Ironically, this is in spite of the apparent decision of the leader of the Federal Reserve, Mr. Bernanke, to make no comment at all regarding QE after the most recent FOMC meeting. Words spoken before led to a bout of volatility, which is exactly what Mr. Bernanke wants to avoid.

But he does not need to say anything. US economic indicators, from Purchasing Managers Index (PMI) - up to 55.4% for July, an increase of a very significant 4.5 percentage points from June's figure, through US Gross Domestic Product (GDP) - increased 1.7% in the second quarter of 2013 as against the 1.0% growth which was the consensus of economists, to employment - an increase of 200,000 jobs in July according to ADP, which presages today's US Non Farm Payrolls report, all do the talking for him.

That other stalwart of those who wish to profit from a rising USD, the Australian dollar (AUDUSD pair being traded) also headed further in the right direction overnight (European time).