Bernanke Remains Dovish – Gold and Silver Rally

The Chairmen of the Federal Reserve Ben Bernanke testified today in before the January FOMC meeting. In his testimony Bernanke remained dovish regarding the FOMC monetary policy. He stated that the current policy of low interest rates and asset purchase program might bring some additional risk to the market but the benefits to strengthening the economy outweigh this risk:

“Although a long period of low rates could encourage excessive risk-taking, and continued close attention to such developments is certainly warranted, to this point we do not see the potential costs of the increased risk-taking in some financial markets as outweighing the benefits of promoting a stronger economic recovery and more-rapid job creation.”     

Since Bernanke was very positive regarding the ongoing progress of the Fed’s current monetary policy, this news may have contributed to the rally of precious metals including gold and silver prices during the day.

Bernanke was also confident that the Fed will be able to maintain the currently low inflation, which remains around the 2% annual mark.

“Measures of longer-term inflation expectations have remained in the narrow ranges seen over the past several years. Against this backdrop, the Federal Open Market Committee (FOMC) anticipates that inflation over the medium term likely will run at or below its 2 percent objective”  

In the January FOMC meeting, several FOMC members voiced their concern around the current $85 bullion a month of asset purchase program and stated they should consider putting a time limit or at least slowing down this program in the near future.

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