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Analysts Say Gold May Rise on Fed Stimulus

Release Date: 
Friday, August 24, 2012

The price of gold was slightly lower after reaching four-month highs yesterday. Gold was down $1.70 at 7:55 a.m. Pacific Time on the New York Spot Market, trading at $1,670.40 per ounce.  Spot silver was $.14 higher at the same time, trading at $30.82 per ounce.  (Click here for the most current spot prices.)

Gold traders remain bullish on stronger belief the Fed will take implement a third round of quantitative easing to improve economic growth. Twenty-nine of thirty-five analysts surveyed by Bloomberg expect gold prices to rise next week, with only three bearish and three neutral. This is the most bullish analysts have been since Nov. 11, based on weekly Bloomberg surveys.

“There’s no doubt about it, this is gold’s moment,” said Charles Morris, who oversees about $2.5 billion of assets at HSBC Global Asset Management in London. “Additional stimulus is inevitable, the question is how it comes.” According to Morris, “all the long-term trend signals suggest that gold is in a very strong bull market.”

"Gold has finally moved and looks like it wants to test the $1,700 level sooner than later," said Afshin Nabavi, head of trading at Geneva's MKS Finance.

"Having got the necessary signals from the Fed for QE3, the market is just waiting for a confirmation to spike higher," Richcomm Global Services analyst Pradeep Unni said. "Any consecutive release of weaker than expected economic data will only add fuel to the fire."

The gold market is “likely to scrutinize coming economic data releases on inflation and employment. Downside surprises may lead to a further rally in gold prices,” HSBC commodities analyst James Steel said in a research note.

Gold may also be supported toward the end of 2012 and the beginning of 2013 on rising seasonal wedding and festival demand in Asia, said Ronald Stoeferle, a commodity analyst at Erste Group Bank AG in Vienna.

(Sources: “Gold Bulls Strongest In Nine Months As Hoard Builds: Commodities,”Bloomberg, August 24, 2012; “Gold, silver retreat after multi-month highs,” Marketwatch, August 24, 2012;  “PRECIOUS-Gold dips from 4-1/2 month high, Fed-linked rally cools,” Reuters, August 24, 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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