Gold at 6-1/2 Month High Following Stimulus Posted by Adam King on September 21, 2012
September 21, 2012 – The price of gold rose 1 percent on Friday to a 6-1/2 month high as central bank measures to stimulate growth increased market expectations for increased liquidity that will have a market effect including fuel inflation and interest rate inflations. The precious metal is now ready to finish out a fifth straight week of gains.
Firmer stances in markets also benefited bullion. European shares and the euro gained as oil rallied from a 1-1/2 month low during a movement by investors back into markets after the central bank announced stimulus measures.
The spot price of gold peaked at $1,787.20 per troy ounce and was up 0.8 percent to $1,771.14 per troy ounce as U.S. gold futures for December delivery gained $14.00 per troy ounce to $1,784.20, according to Reuters.
The latest central bank to unveil easing measures this week is the Bank of Japan, following the announcement of the Federal Reserve of an aggressive asset purchasing program earlier this month and the European Central Bank announced plans to purchase bonds from the Eurozone’s most heavily indebted countries.
The decision by the Federal Reserve—which constitutes a third round of quantitative easing that includes the purchase of $40 billion a month of mortgage-backed debt and will continue until there is an improvement in the labor market—brought the spot price of gold up 2 percent in a single day of trading.
Ross Norman, chief executive of bullion broker Sharps Pixley, said that QE3 is a game-changer in the minds of many people because they now have to think more seriously about where they should be putting their money. He also stated that gold appears to have taken on a life of its own and we may see the price breach the $1,800 per troy ounce level in the next couple weeks.
PradeepUnni, a senior analyst with Richcomm Global Services, said the open-ended scheme to print as much money as needed until the U.S. economy recovers has ensured gold has fewer barricades on its way to earlier highs at least. There has been resistance at the $1,787-$1,790 per troy ounce level, according to Unni, therefore we need a consecutive closing above $1,790 per troy ounce in order to avoid a correction.