All4One,
With the US Fed buying $85bil Tbonds per month the interest rates on those bonds is held down. Other investors who bid for those Tbonds would like a higher interest rate to compensate for the risk seen in the markets right now. So when the Fed tapers their purchases the rates are expected to go up. The Fed will watch them carefully though to make sure they don't get out of control. If rates rise too much tapering will stop!
How does it affect gold? It appears that some big institutional investors have sought refuge in buying commodities and stocks, which themselves are risky, but have maybe paid better returns, if they were lucky. When the Tbond rates go up some of them will jump back into Tbonds, which is supposed to be the least risky of all investments. So they will sell other investments which would include gold. That's the fundamentals but it doesn't explain the wild swings.
Now all the volatility we see in gold and other markets is simply the big players front running the news, as well as having huge leverage both long and short. The news is much more important than the facts if you want to make big money. There is always someone who will jump first on the news and the rest have to follow before they get killed. So it becomes a casino based on news reports and language and the big boys will always get the news first.
This applies to all the markets and as far as I can tell it always has. These days it just happens faster due to electronic media etc.
Add to My Watchlist
What is My Watchlist?