Bullion is feeling the pain, dropping well below $1,300 after Wednesday's Federal Reserve statement delivered a decisive blow to gold prices. The prospect of a more responsible Fed has led to a buoyant dollar and a sharp selloff in precious metals.
I have fought this move for a long time, but I've now come to a new conclusion. I finally realize that it's not a question of the Fed's level of accommodation—which is clearly high—but of how the Fed's policies compare with those of other central banks. Right now, the Fed is the one central bank that is considering tighter policies, and that seems good enough to keep weight on gold prices, even if those tighter policies are enacted at an undetermined time in the future.
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