Gold Stays Near Six-Month Highs Posted by Adam King on September 10, 2012
September 10, 2012 – After posting a third successive gain in weekly trading Friday which brought the gold price to six-month highs, gold drifted slightly on Monday as a report on the U.S. jobs market indicated a weaker market and fueled expectations for a loose U.S. monetary policy.
The monthly U.S. employment report, released Friday, indicated less jobs were actually created than were expected, giving the price of gold a boost of more than 2 percent for the strongest gain in one day during the month.
Gold has been on a three-week bull run amid gathering expectations for economic stimulus from the Federal Reserve, which may possibly be announced as early as Thursday when the Federal Open Markets Committee is scheduled to release its decision on interest rates. The FOMC has been pursuing a policy of holding rates at current levels for all of the current year.
Against this backdrop, investments made in gold-backed exchange-traded products achieved a record high last week as holdings of U.S. gold futures achieved the highest levels in a year.
The spot price of gold drifted 0.3 percent to $1,730.30 per troy ounce before the trading session in New York commenced after rising 2.7 percent in last week’s trading, the third consecutive weekly increase and the longest bull run in gold since the beginning of the year.
Michael Lewis, an analyst with Deutsche Bank, said the revising of U.S. expectations was main event risk, or general concern about the status of the economy overall. The revision of U.S. expectations toward a more Fed-friendly decision on monetary policy also coincides with the recent decision from the European Central Bank to pursue unlimited bond buying, though they have also promised to participate in sterilized easing.
Lewis sees the combination of quantitative easing and dollar weakness as reigniting the interest of the private sector, as central banks and the public sector have already been aggressive buyers of gold. This dynamic does not change the view of Deutsche Bank, but, in Lewis’ words, it makes them more relaxed about their view.
Deutsche Bank analysts have projected the price of gold to average $1,726 per troy ounce this year before a rally into $2,000 per troy ounce next year, according to a Reuters mid-year price survey conducted in July.