Gold In Very Strong Bull Market Without QE
Posted by James Randolph on August 24, 2012
August 24, 2012 – The spot price of gold bullion traded just below $1,670 per troy ounce for most of Friday morning’s trading session in London, slightly lower than the four month high established yesterday.
Stock markets were lower as US Treasuries gained while analysts continued speculation about a round of quantitative easing from the Federal Reserve.
Going into the weekend, the spot price is on track to post a gain of 3 percent on the week following a rally in gold after Wednesday’s publication of the Federal Open Market Committee’s minutes.
Charles Morris with HSBC Asset Management believes additional stimulus is inevitable, but there is a question of how it will come. Morris manages $2.5 billion.
Morris added this is gold’s moment and all the long-term trend signals suggest gold is in a very strong bull market.
A PM fix in London of $1,668 or higher would make this gold’s biggest weekly gain since January.
The Federal Open Market Committee minutes published Wednesday indicate that “many members” feel that more monetary stimulus including the possibility of another round of quantitative easing could be needed “fairly soon” as economic data does not point to a recovery.
Tom Porcelli, chief US economist with RBC Capital Markets, indicated that if August’s nonfarm payrolls report shows another 150,000 or more jobs added it could buy some time before a round of stimulus. If it is 100,000 or below, the Fed could consider initiating a round of quantitative easing in September, according to Porcelli.
The amount of gold bullion held in reserve to back shares in the SPDR Gold Trust (GLD), the world’s largest gold ETF, rose to the highest level since April yesterday at 1,286.5 tonnes.
Gold forward contracts on the Shanghai Gold Exchange hit their highest levels in nearly five months Friday with an increase in trading volumes.
Silver bullion traded at $30.30 per troy ounce Friday morning, up 8 percent on the week, with other commodities flat for the day.
Daniel Briesemann with Commerzbank believes in the short term it is difficult to see considerably higher commodity prices without quantitative easing. In the long term, however, Briesemann does not think that commodities need quantitative easing measures in order to rise based on long term fundamentals already at work in the market.