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Gold Rises as Bernanke Plans Continued Stimulus

Release Date: 
Tuesday, January 15, 2013

The price of gold rose after Federal Reserve chairman Ben Bernanke said that he intends to continue the central bank’s current fiscal stimulus policies.  Gold was $15.30 higher at 8:39 a.m. Pacific Time on the New York Spot Market, trading at $1,684.10 per ounce.  Spot silver was $0.28 higher at $31.46 per ounce.  (Click here for the most current spot prices.)

In comments late Monday, Mr. Bernanke said that he wasn't satisfied with the economy's progress despite recent signs of improvement, and the Fed would continue its $85 billion per month bond purchasing program.  Bernanke said the recovery was still fragile and there is still “quite a ways to go…” 

"We still believe the U.S. central bank is set to remain accommodative in the near term," VTB Capital analyst Andrey Kryuchenkov said in a note.  According to Adam Klopfenstein, a senior market strategist at Archer Financial Services Inc. in Chicago, “the market is reading this as a sign that the easing will continue for some time.”

Saxo Bank vice president Ole Hansen said concerns over the stability of the U.S. financial system ahead of talks on managing debt are helping to burnish gold's appeal.  "The debt ceiling debate should also offer some support as it once again raises the risk that U.S. growth could be hurt,” he added.  “Gold is also being supported by the fact that we have now managed to close above 200 day simple moving average for a third day."  

Money managers also expect gold may move higher.  “While the rise may not be parabolic, we will see higher trading,” said Peter Sorrentino, who helps manage about $14.7 billion of assets at Huntington Asset Advisors in Cincinnati. “The money from all that easing is out there. The depreciation and loss of purchasing power will continue to manifest itself as we go forward.”

“Gold will definitely continue to rise,” said Donald Selkin, the New York-based chief market strategist at National Securities Corp., which manages about $3 billion of assets, including gold.

(Sources: “Platinum Climbs Above Gold,” Wall Street Journal, January 15, 2013; “PRECIOUS-Platinum rallies to 3-month high after Amplats overhaul,” Reuters, January 15, 2013; “Gold Forecasters Splitting on Peak for Bull Market: Commodities,” Bloomberg, January 15, 2013; “Platinum Advances to Three-Month High on Production Cuts,” Bloomberg, January 15, 2013)

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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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