Goodbye QE, So Long Gold

The end is near for quantitative easing. And thus, gold bugs can kiss $2,000 an ounce goodbye.

So suggests the minutes of the mid-December Federal Open Markets Committee meeting, which was released to the press Thursday afternoon.  The minutessuggest that a number of FOMC members believe that their monthly mortgage backed securities and Treasury purchases (“aka quant easing”) should cease by year-end 2013.

Given the recovery in financial market risk-taking, European economic stability (thanks to the Draghi-European Central Bank put), and the recent tax deal between Republicans and Democrats that eliminates long-term tax uncertainty, the “doves” will win the quant-easing debate this year. Look for the money printing to cease by year-end, says Paul Hoffmeister, chief economist at boutique investment research firm Bretton Woods Research in New Jersey.

Bretton Woods thinks the printing press will slow at the Fed in the second or third quarters.

Quant easing policy, however, will be driven by financial market conditions, which have dramatically recovered since Mario Draghi’s actions in late July have removed EU currency, banking, and sovereign debt risks. Those God awful bonds have a definite buyer.

 The gold and dollar markets have significantly discounted the amount of excess liquidity that the Fed’s present quant easing policy will create and Hoffmeister is recommending clients remain neutral on the precious metal as a result.  Gold has more downside than upside.

The SPDR Gold Trust (GLD) exchange traded fund declined 1.2 percent on Thursday and is down 6.5 percent over the last three months.

This year is setting up to be the year in which the secular bull-run in gold finally ends. So long gold $2,000. We hardly knew ye.

Weak gold generally means a stronger dollar. In addition, the general improvement in the financial markets in the first quarter of 2013, as well as the high probability that the European Union will remain in tact, also suggests that the long run in bond prices is drawing to a close.  The 10-year Treasury yield will break out higher into a new trading range this year, Hoffmeister predicts, somewhere between 2.0 percent and 2.75 percent.  Current 10 yearTreasury bonds yield 1.91 percent.

source

please give me comments thanks