Gold prices contracted for the biggest one-day decline this month after the Federal Reserve disappointed expectations of more aggressive monetary stimulus. On Wednesday, Operation Twist was expanded, enabling the Fed to sell short-term debt securities in order to buy longer-term ones, reducing long-term borrowing costs by $267 billion. Originally scheduled to expire at the end of June, the program is now projected to run until the end of the year.
The markets had been anticipating further monetary easing to maintain pressure on long-term interest rates and thereby keep the opportunity cost of holding gold relatively low. Increased monetary easing would also enhance demand for gold as an alternative asset class to store value by placing downside pressure on the dollar. . .View Full Article