Gold has plummeted to a record low after the Federal Reserve said the US economy is in a state of “permanent crisis”.
It is the latest indication of a deep economic slowdown in the US, with consumer spending slowing and businesses struggling to find customers.
“We are seeing a continued deterioration in our recovery from the global financial crisis and the ensuing global recession,” Fed Chair Janet Yellen said during a recent speech.
A fall in gold to $1,268.50 a troy ounce in early trading, from $1 and above in June, has been a big driver of the move, pushing it below $1k for the first time since November 2013.
Gold is down almost 80% this year, the lowest level since April 2008.
The Fed has been pushing for a stimulus package to cushion the financial system from the effects of the financial crisis, which has pushed the US unemployment rate to near 10% and driven many Americans into poverty.
President Donald Trump has repeatedly called for a rescue package that would be able to cushion against the effects.
But the Fed has resisted calls for more spending to revive the economy, fearing it could cause inflation and spur a more painful recession.
“The Fed’s action today is not about keeping the economy from falling further into recession, it is about making sure that the US recovery from this financial crisis is sustainable and long-lasting,” Yellen told the Federal Open Market Committee on Wednesday.
“That is the main purpose of our policy.”
Fed Chair Janet Lellen addresses the Fed’s annual meeting in Washington, DC, US on November 23, 2018.
Federal Reserve Chair Janet M. Yellen addresses Fed’s Annual Meeting in Washington on November 21, 2018.(AFP)The Fed is also looking at ways to boost demand, by buying bonds, which is the only form of investment the US has since the 2008 financial crisis.
The Fed raised interest rates in late September, signalling it was ready to start tightening the purse strings.
Gold futures have risen in recent weeks, rising more than 6% this week to $US2,872.10 an ounce.
The drop comes after the Fed said it was expecting the economy to be in a “perpetual crisis” in 2020.
But Fed policymakers have been working to bring the economy back on track.
In recent weeks the Fed raised short-term interest rates to a level the central bank has never before done.
Gold and US interest rates are currently at historic lows and investors are watching closely.
If gold prices remain near $US1,300 a tray, it could push US economic growth into a recession, as it is now.
Fed Chair Yellen, who will be replaced by Vice-Chair Stanley Fischer, is widely expected to lead a committee that will decide next month whether to move the US central bank to a more gradual policy easing programme.