Market Watch: Bank of Japan end Stimulus Programme as Gold Price Plummets
The gold price fell sharply Thursday night in reaction to the Bank of Japan’s decision to extend their stimulus program. The BOJ will also restructure Japan’s government debt and the government pension fund is set to purchase Japanese shares. Japanese equities climbed sharply on the news.
The US economy grew at an annualised rate of 3.5% in the 3rd quarter according to fresh data from the Commerce Department. The USA was boosted by a significant improvement in new exports and increased government spending, whilst unemployment has also continued to fall. The Federal Reserve viewed these positive economic developments as sufficient cause to announce the end of its stimulus scheme on Wednesday evening. The number represents a return to a healthy-looking trend.
Despite bringing QE to an end the FED has been reinforcing the idea that things weren’t going to change in a hurry, rates will not be raised for a ‘considerable time’. The language has changed, rather than a ‘significant underutilisation’ of labour, this was now ‘gradually diminishing’ leading to ‘solid job gains and a lower unemployment rate’.
Gold Price Fall
This time the decline in the price of gold looks real. Key long term support at $1180 has given way Friday resulting in a monthly close below here. This confirms the start of the next leg lower in a secular trend lower for gold and silver. A measured medium term target based on the height of the triangle suggests the psychological 1000 point.
Banking stocks drove the FTSE to a strong finish on Friday after the Bank of England (BoE) unveiled softer-than-expected requirements for leverage ratios and also thanks in part to an unexpected boost to stimulus from the Bank of Japan announced overnight.
The chancellor George Osborne has urged the BoE to consider the impact toughening the regulatory regime for banks would have on lending to households and business.
While he said he “fully accepts” the logic for an extra component to be added to the 3% level, the chancellor warned that work needed to be done on understanding what the impact might be on banks and large building societies.