Gold Pushes Higher on Fed Move, Correction Possible Posted by James Randolph on September 14, 2012
September 14, 2012 – Gold breached new six-month highs in markets on Friday following the long-anticipated announcement of stimulus from the U.S. Federal Reserve, but such a strong surge in the market brings with it the possibility of a corrective movement before gold continues the climb.
The gains made on Friday are relatively modest after the 2 percent surge the market experienced on Thursday and the cumulative gain of 10 percent in the last month, most of which has been attributed to anticipation of a quantitative easing program.
Thursday, following a two-day meeting of the Federal Open Markets Committee, the Federal Reserve launched an open-ended mortgage debt buying program and pledged to keep interest rates low until at least mid-2015, a six month to one year extension from previous commitments.
Precious metals were up across the board with silver, platinum, and palladium, all of which are used in industrial applications, climbing to the highest levels seen in their respective markets in roughly six months.
The spot price of gold gained 0.45 percent to $1,774.27 per troy ounce after reaching highs at $1,777.51 per troy ounce, the highest prices since February 29.
Tom Kendall, an analyst with Credit Suisse in London, said that after those kinds of moves in the gold market in the past two or three weeks it would be natural to experience a period of consolidation.
Going into the tail end of the year, he adds, he is looking for gold to get to at least the $1,850 per troy ounce level.
Cash gold is set for a 2.3 percent gain in the week, a fourth week of consecutive gains, as investors are taking advantage of encouragement from central banks efforts to promote growth through the hurried printing of cash.
Edel Tully with UBS said gold would see stiff resistance at the $1,790.75-$1,802.93 per troy ounce levels, which are the February and November highs. UBS is also expecting a corrective phase around this area that will unwind over-extended upside conditions.
Kendall added that thus far the rally has been mainly fuelled by institutional and hedge fund buying, but one key to the rally continuing would be a revival of physical buying in foreign markets.