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Bank of Japan Expands Monetary Stimulus as Recession Threatens

Release Date: 
Tuesday, October 30, 2012

The price of gold moved slightly higher on Tuesday folloinwg fresh stimulus measures from the Bank of Japan.  Gold was $1.60 higher at 7:13 a.m. Pacific Time on the New York Spot Market, trading at $1,712.40 per ounce.  Spot silver was $.21 higher, trading at $32.07 per ounce.  (Click here for the most current spot prices.)

The Bank of Japan (BOJ) increased its monetary stimulus for the second consecutive month in response to mounting evidence the country’s economy is on the brink of recession.  Deutsche Bank analyst Daniel Brebner said the BOJ’s actions were supporting the gold price even though the move had been expected.

A Reuters poll shows economists forecast that 125,000 jobs were added last month, although the unemployment rate is expected to notch up to 7.9 percent.  The non-farm payrolls report for October is due Friday.  "An increase in unemployment is a reason to be positive on the gold price because we would see a greater possibility of further monetary expansion," Mr. Brebner said.

Global Hunter Securities said that gold prices can surpass $2,000 per ounce by early next year.  “The U.S. Federal Reserve, through multiple initiatives and actions, consequently has become gold’s best friend during the past four years,” said strategists Jeffrey Wright and Richard Hastings in a report.  And “the commitment from the Federal Reserve to maintain an accommodative policy until 2015…provides a strong foundation for what we expect will be continued gains in gold prices into 2014.”

Peter Krauth of Money Morning Global Resoures said that gold could hit $2,200 per ounce by April or May of next year.

Physical gold dealers in India cited a “notable pickup” in the past couple of sessions amid lower prices there, Barclays said in a report.

(Sources: “PRECIOUS-Gold rises in line with stocks, but gains muted,” Reuters, October 30, 2012 “Gold Swings Between Gains and Losses on Physical Demand, Dollar,” Bloomberg, October 29, 2012; “Gold flirts with $1,700: Soft-landing or take-off?Emirates 24/7, October 29, 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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