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Gold rebounds after reaching multi-year low

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Gold prices closed higher on Monday despite comments from Federal Reserve officials suggesting that the central bank may soon pullback its bond-buying program.

“The central bank’s bond-buying program, also known as quantitative easing, has helped support gold prices,” wrote Myra P. Saefongand Shawn Langlois in a MarketWatch report.“The program contributed to a weaker dollar, which in turn buoyed prices for dollar-denominated gold.”

In fact, two Fed officials offered comments suggesting a taper may be imminent. St. Louis Fed President James Bullard said that the best course of action may be a small tapering in December. Richmond Fed President Jeffrey Lacker stated that, at their meeting next week, the Fed will definitely be discussing pulling back on quantitative easing.

Towards the end of the day Richard Fisher, president of the Dallas Federal Reserve Bank, reaffirmed that he backed tapering the central bank’s bond buyback program as the earliest possible opportunity.

Yet, despite these indications that the buyback program may be coming to an end, the price of gold for February delivery rose in trading, suggesting that it may have reached a bottom.

“Gold’s price gains over the last two sessions, in the face of news indicating that a QE taper may come sooner rather than later, may mean that the metal has finally priced in such an event,” said Brien Lundin, editor of Gold Newsletter. “In short, we may have run out of sellers.”

“And with the bearish side of the boat so overcrowded, the gold market appears primed for a significant short-covering rebound,” he told MarketWatch.

Gold dropped last week, amidst the release of multiple positive economic indicators, including a better than expected jobs report. However, towards the end of the week it rose.

“The fact that gold failed to fully penetrate its prior lows from last week is a welcome sign for bullish investors,” said Fawad Razaqzada, a Forex.com technical analyst. “This has helped to prevent it from closing below that long-term bullish trend line around $1,225.”

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