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Analysts Expect Ongoing Monetary Easing

Release Date: 
Friday, November 9, 2012

Gold prices were essentially unchanged on Friday as market observers discussed the outlook for monetary policy after President Obama’s reelection.  Gold was $.10 higher at 7:13 a.m. Pacific Time on the New York Spot Market, trading at $1,733.00 per ounce.  Spot silver was $.24 higher, trading at $32.65 per ounce.  (Click here for the most current spot prices.)

The euro dropped to a two-month low against the dollar as fears mounted that the euro zone's debt crisis and struggling economies could drag down global growth. "In spite of dollar strength, the market appears to continue to take comfort from Obama's re-election and the implied support this gives to continued monetary accommodation from the Fed," Standard Bank said in a note.

Nic Brown, head of commodities research at Natixis, said the Obama victory signaled a continuing environment of relaxed monetary policy, which was likely to support gold prices.  "An Obama victory enhances the likely longevity of ongoing quantitative easing," he said.

“With the fiscal cliff approaching fast, an entire new group of investors will be pouring into the precious metals in anticipation of the grim fact that the U.S. is going to try and print itself out of debt,” said David Morgan, publisher of The Morgan Report, a newsletter on precious metals investing.

“Obama is a supporter of Bernanke and his re-election means that the ultra-loose monetary and fiscal policies by the Fed will continue,” said Daniel Briesmann, commodities analyst at Commerzbank.  “More and more liquidity will be put into the system and therefore there’ll be inflation fears and concern about currency devaluation.”

“Now, with the certainty of the election results and four years of economic and monetary policy similar to the past four, higher gold prices seem both inevitable and imminent,” said Brien Lundin, editor of Gold Newsletter.

Gold may reach $1,775 per ounce this month, said Edward Meir, analyst at INTL FCStone.  “With President Obama re-elected, the thinking now is that the Fed’s easy-money policies will likely go on.”

Gold traders were the most bullish in 11 weeks as investors accumulated record bullion holdings on speculation of continued monetary stimulus. Twenty-five of thirty-three analysts surveyed by Bloomberg expect prices to rise next week.

(Sources: “Gold Traders More Bullish After Obama’s Re-Election: Commodities,” Bloomberg, November 9, 2012; “What Obama’s re-election means for gold,” Marketwatch, November 9, 2012; Gold Poised to Decline as Stronger Dollar Curbs Demand,” Bloomberg, November 9, 2012; “PRECIOUS-Gold hits 3-week high on U.S. fiscal fears,” Reuters, November 9, 2012)

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†This material has been prepared for private use. Although the information in this commentary has been obtained from sources believed to be reliable, Goldline does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.

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