Bernanke and Gold
What was the Bernanke’s impact on gold? Well, it was quite positive, as gold gained about 134 percent under his tenure, as one can see in the chart below.
Chart 1: Gold prices (London P.M. Fix, in $, monthly averages) under Bernanke’s Fed tenure.
What were the reasons behind such a rise? Well, in 2008 the Lehman Brothers collapsed, triggering the financial crisis. The price of gold initially declined, as investors liquidated their gold holdings to raise some cash. However, after a while, gold started to soar due to the increased.
Bernanke helped to ignite the, as he conducted as a response to the crisis. In particular, he implemented by slashing the to practically zero. Since it didn’t help to stimulate economy, Bernanke inaugurated the , ballooning the .
The first two rounds of these asset purchases programs were very positive for the precious metals market, as investors worried about the rise in theand inflation. The price of gold almost reached $1,900. However, as the U.S. economy recovered and there was no on the horizon, the price of gold entered a in September 2011, just two months after the end of the QE2. The increased confidence in the Fed and the U.S. economy reduced and the bidding for . Consequently, the stock market rose, while the price of gold declined.
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