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Continued Fed Policy On Monetary Easing May Be Positive for Gold

Release Date: 
Wednesday, October 24, 2012

Gold was down slightly as investors awaited comments from the Fed’s policy meeting which concludes today. Gold was $1.20 lower at 7:48 a.m. Pacific Time on the New York Spot Market, trading at $1,707.50 per ounce.  Spot silver was $.14 higher, trading at $31.91 per ounce.  (Click here for the most current spot prices.)

Credit Suisse Group Gold said that gold could benefit from the confirmation of expansive monetary policy by the Fed Open Markets Committee today.  UBS analyst Edel Tully said, “a dovish comment which reiterates current views and the mid-2015 rate guidance would somewhat help precious metals sentiment.”

“We shouldn’t underestimate the deeper and broader held view that the current macro backdrop is gold positive,” Tully said.  Discussing the recent price consolidation, she commented, "there are two stories at play here - a short-term case of frustrated investors, disappointed that gold hasn't rewarded them with a +$1,800 price tag, but against this is another player, with a more strategic view who is either 1) not willing to sell into current weakness and/or 2) using the pullback to add to length.”  She noted that “ultimately higher gold prices are only a matter of time away."

James Steel, an analyst at HSBC wrote, “emerging-market demand for bullion has picked up, given the recent gold price decline, and this may act as a backstop against steeper price drops.”

Polymetal International Plc Chief Executive Officer Vitaly Nesis said he has a $2,000 per ounce target for gold over the next six months.

(Sources: “PRECIOUS-Gold holds near 7-week low; eyes on Fed meeting,” Reuters, October 24, 2012; Has QE3 fatigue set in to the gold market?,” Mineweb, October 23, 2012; “Gold Is Seen Rebounding Following Drop to a Six-Week Low,” Bloomberg, October 23, 2012; “Polymetal Sees Gold at $2000 Over Next 6 Months,” Bloomberg, October 22, 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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