QE unlimited sparks risk-on party as precious metals jump

LONDON (Sept 20)  World stock markets, foreign currencies and commodities extended yesterday's jump versus the U.S. dollar in Asia and London on Thursday morning, with gold regaining the $1,370 level it leapt to after the Federal Reserve voted not to trim its quantitative easing program.

Defying the expectations built since April, the Fed gave financial markets what one FX strategist called "a massive green light for a risk-on party."

Silver hit a new five-week low shortly before the U.S. central bank's announcement. It stood 9.5% higher barely an hour later.

"We are in QE unlimited," said money-manager and Gloom, Boom & Doom publisher Marc Faber, speaking to Bloomberg last night and stating that "I always buy gold...I view it as an insurance policy. I think responsible citizens should own gold.

"The Fed doesn’t know anything else to do [but print]. They've boxed themselves into a corner."

Discussing the next likely chair of the U.S. central bank, "Janet Yellen will make Mr. Bernanke look like a hawk," Faber said.

The U.S. stock market yesterday surged to new all-time highs.

Silver's 7.1% rise from Wednesday to Thursday's London Fix was the 78th largest move in 45 years.

Gold began rising before Wednesday's statement, adding $20 of the $83 per ounce it would gain by this morning's peak in late Asian trade.

Gold rose less quickly for non-U.S. investors, however, as the euro and sterling both hit their best levels since midwinter on the FX market.

The dollar also fell in a straight line against emerging-market currencies previously dented by taper expectations, losing 3% against the Indian rupee, Brazilian real and Turkish lira.

"We think it's very important that emerging markets grow and are prosperous," said chief U.S. central banker Ben Bernanke on Wednesday.

"We play close attention to what's happening in those countries. It affects the United States. [But] what we're trying to do with our monetary policy...is to create a stronger US economy."

Meantime in India – the world's largest consumer market for gold – industry group the Bombay Bullion Association said it unanimously backs nationalist BJP candidate Narendra Modi as prime minister in the 2014 election

"The bullion traders in this country are desperately looking for a change in the Indian political system," said BBA president Mohit Kamboj.

"Narendra Modi is the right choice," he added, repeating how gold and politics in India were seen interacting earlier this week by BBA colleague Mukesh Mehta. "We wish BJP to come to power and run this country."

Ruling Congress Party economic affairs secretary Arvind Mayaram today said the government's aggressive anti-gold import rules had cut inflows "drastically."

"Because of the measures we have taken we expect imports of only 750 tonnes [in 2013]," he said – a drop of 11% from fiscal-year 2012.