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Gold Higher as Bernanke Says Fed May Add Stimulus

Release Date: 
Thursday, April 26, 2012

The price of gold was higher the day after Fed Chairman Ben Bernanke reiterated the central bank’s low interest rates through at least 2014 and left open the possibility of additional economic stimulus. Gold traded at $1654.40 per ounce at 7:13 AM Pacific Time on the New York Spot Market with silver at $30.96 per ounce.

Bernanke said additional quantitative easing is still "very much on the table..." The Fed previously bought $2.3 trillion of debt in two rounds of quantitative easing between 2008 and 2011.

"Although the Fed did not announce another round of easing, intentions to keep monetary policy at highly accommodative levels are a bullish case for gold prices," said James Steel, an analyst at HSBC Securities. Analysts at VTB Capital said in a note that "subdued inflation expectations and still dovish interest rate language will likely keep bullion supported for now."

Sharps Pixley CEO Ross Norman said in a note that he expects a breakout for gold. "It looks likely that a sharp move to the upside is a distinct possibility based upon rising economic tensions in Europe," he said.

"Gold regained its footing after Bernanke said the Fed is prepared to do more for the U.S. economy," said Lynette Tan, an analyst with Phillip Futures Ltd. "I think going forward, gold will probably trade in the direction of where the macro-economy is going. If we hear fresh news from the euro zone that the debt crisis is re-emerging, then we could see some safe haven demand." Tan added that the market will take cues from U.S. jobless claims data scheduled to be released today. If the numbers worsen, "we could see some safe-haven buying," she said.

"We think that in the days ahead, focus will revert to the still-festering European debt crisis and the fact that we are in a synchronized global slowdown, likely keeping pressure on the central banks to remain accommodative," INTL FC Stone analyst Edward Meir wrote in a note.

(Source: "Gold gains on weakened dollar, dovish Fed," MarketWatch, April 26, 2012; "Gold Extends Advance on Optimism Fed Will Spur Growth," Bloomberg, April 26, 2012; "PRECIOUS METALS: Gold Edges Upward In Asia; Range Trade Expected," Wall Street Journal, April 26, 2012; "PRECIOUS-Gold bounces on Fed reassurance, firm equities," Reuters, April 26, 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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