Gold Steady at Five-Month High After Fed Posted by James Randolph on September 03, 2012
The price of gold pulled back slightly but held toward five-month highs in trading
on Monday, mostly fueled by last week’s indication from the head of the Federal Reserve
that that central bank could take more action and also fuelled by indications that investor
demand in the gold market has picked-up.
The price of gold gained 4.8 percent in the month of August, the third successive
monthly gain and largest one-month gain in price since trading sessions in January of
this year. The gains in price were fuelled largely by expectations the Fed could begin
another program of quantitative easing in order to keep interest rates low and stimulate
Holdings of gold in exchange-traded funds hit a record high on Friday as data
showed speculative holdings of US gold futures managed their largest weekly increase
since the first few weeks of the year.
Ben Bernanke, Chairman of the Federal Reserve, spoke at an annual central
banker conference in Jackson Hole, Wyoming, last week and left the door open to the
possibility of further fiscal stimulus on the part of the Federal Reserve.
The spot price of gold drifted 0.2 percent to $1,687.41 per troy ounce after
touching a five-month high at $1,692.71 per troy ounce on Friday, which was a 2.1
percent gain to make it the best day in gold since June.
U.S. gold futures for December delivery gained 0.1 percent to $1,690.00 per troy
ounce. The U.S. market is closed on Monday for a public holiday.
Afshin Nabavi, head of trading at MKS Finance, said investors were waiting for
Jackson Hole. The possibility of cheaper levels in gold tempted many investors to sit
on their money in the pursuit of better prices. Nabavi sees the price of gold possibly at
$2,000 per troy ounce on an analysis of the political and economic problems facing us.
The price of gold had doubled since the Fed first instituted quantitative easing, the
main stimulus program employed by the U.S. government, in late 2008. The program to
date has officially cost more than $3 trillion.
With the possibility of quantitative easing still open to the Fed and to the
markets, the gold market appears ready to sustain multi-month highs.