Fed launches QE3: Markets get relief!!!

Last week we saw great volatility in precious metals. Gold that had reached a high of Rs. 32,200 per 10gram had plunged down to almost Rs. 31,800 and then bounced back to a new high of Rs. 32,650 after the Fed meeting. Such huge fluctuations were seen after Bernanke’s speech, in which he announced the launch of QE3.

Internationally, gold will cross $1800 ounce by year end, effect of which will be seen on the domestic prices too where gold is expected to cross Rs. 35,000 per 10 gram by year end.

The commodity and financial markets were shocked with the announcement made by the FED on Thursday. The Fed decided of buying open ended asset. This decision of the Fed created great impact on the markets in Thursday and Friday and it will continue to show it’s after affected in the weeks to come.

The market was surprised by this asset buying decision of the Fed. Traders and analysts did expect a third round of quantitative easing, but they did not expect that the Fed would take the asset buying decision.

The Fed declared that it would continue to buy asset until the labor market improved and the economy began to grow. Moreover the Fed said that it would continue with stimulus even if inflation began to exceed the

Apart from the meeting, other factors that are likely to influence the market are:

1. Tensions prevailing in the Middle East as more embassies are under the threat of attack.

     2. Business data, GDP growth released by the US, Euro zone and China

     3. Philly Fed Index and Empire State Index scheduled for discharge.

Apart from gold, one metal that has once again caught attention by investors is silver. Gold has already marked its lifetime high by crossing Rs. 32,200 and on the higher side is expected to touch 35,000. However, for silver there is immense space for growth. Last year silver peaked to almost 75,000 per kg. With current silver prices hovering at around 65,000 per kg and there are bright chances of an upward movement towards its peaked point. Silver is surely going to be the next favorite metal.