The MSCI World Equity index neared its record high as investors expected the US Federal Reserve to keep interest rates at their multi-year lows to allow recent ecnomic growth to continue.
Investors feel that this loose stance by the Fed will remain in place despite the possibility of inflation increasing because they feel that the Fed is more concerned about stimulating the economy than they are about rising inflation.
This led investors to buy gold bullion and to sell government debt because with inflation comes rising interest rates and with rising interest rates come lower yields and lower market prices for government bonds. This led to gold experiencing its largest one-day rise in nine months.
Traders in a major hedge fund also cut back their large short position in gold tipping it above the US$1,300-00 per ounce mark which, in turn, led to plenty of stop-loss buy orders.
This revival in appetite for risk followed the Fed’s decision to recommit to keeping interest rates near zero for some time to come.
The question remains: For how much longer can this 5+ 1/2 year bull run continue?
