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Forex pairs in this Article » EUR/USD (London) - Gold took a big jump on yesterday’s Fed non-move, up almost 5 percent to a high of USD1375.40/oz – its biggest jump in 15 months. But any significant gold rallies will be checked by increased global risk appetite and investors hunt for yield.

Gold had lost almost 22 percent this year on the expectation that the Fed would begin to taper its USD85bn monthly asset purchases. It threatened to rally on escalating tensions in Syria, but with US-Russian co-operation, these tensions have diminished, reducing any haven flows into gold.

Gold saw a huge bull run through to September 2011, when European economic instability, combined with US debt ceiling wrangling and Federal Reserve debasement of the dollar, drove prices above $1,900/oz. But with European instability easing and the prospect of a less-loose Federal Reserve monetary policy, gold has steadily declined.

There were plenty of comments made during the rip-your-face-off gold rally about gold being “over-valued”. Whether in historic terms, dollar terms or any other metric, the concept of gold possessing an intrinsic value is patently absurd. But gold is, has been, and, unless usurped by a more successful Bitcoin-type pretender to the throne, will continue to be the most reliable currency there is. And as such, outside of supply concerns, its price is heavily dependent on risk appetite.

If people are scared, they buy gold

If you want to a call a return of any meaningful gold rally, you have to ask whether we are going to see a return to the kind of financial uncertainty that produced the last sustained rally? Yes, at time of writing, US national debt stands at USD16,944,581,150. That’s a debt-per-taxpayer of $148,170. America is running a gross-debt-to-GDP ratio of 106.58 percent – more than 40 percent higher than in 2008. Eurozone periphery countries are still wallowing in stagnant growth, terrifying youth unemployment figures and one black swan away from another bailout. But without that constant sense of fear that everything that is about to cave in (the one that hung in the air seemingly every day in 2011) there simply are not the drivers for further sustained gold rallies.
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