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Monetary Easing Expectations Strong Among Analysts, Investors

Release Date: 
Tuesday, August 28, 2012

The price of gold was lower ahead of this weekend’s Federal Reserve symposium at Jackson Hole. Gold was $3.70 lower at 7:04 a.m. Pacific Time on the New York Spot Market, trading at $1,668.30 per ounce. Spot silver was $.10 higher, trading at $30.92 per ounce.  (Click here for the most current spot prices.)

Investors and analysts are looking to this weekend’s Jackson Hole meeting for clues on potential Fed action to bolster the U.S. economy. Peter Fertig, head of Quantitative Commodity Research, said “$1,700 an ounce could be surpassed if we get dovish remarks from Bernanke over the outlook for the remainder of this year and on quantitative easing.” Peter Fung, head of dealing at Wing Fung Precious Metals in Hong Kong, said "if we get QE3, gold could rise to $1,680 or $1,700."

Alexander Zumpfe, a trader at precious metals house Heraeus, said, “gold is on the edge to trade through the upper side of its four-month range…with further monetary easing possible, the environment remains supportive.”

"The key is Jackson Hole," said Nick Trevethan, senior commodity strategist at ANZ in Singapore. "Everyone is expecting Bernanke to play up the possibility and willingness to

Jeffrey Rhodes, global head of precious metals at INTL FCStone Inc., expects gold may rise to $1,975 by year-end. “The Eurozone has been quiet of late, but that doesn’t mean the problems have disappeared,” he said. “The U.S. economy has been sluggish and there is a growing belief that there is going to be QE3 soon. This anticipation is driving the market.”

“Europe’s financial situation is straining at the seams and with no fix forthcoming, demand for safe havens is likely to remain strong,” said Bimal Das, director at ScotiaMocatta, the metals trading unit of Bank of Nova Scotia.

“More cash is coming into the market from investors,” said Philip Klapwijk, the global head of metals analytics at Thomson Reuters GFMS Ltd. “We expect there to be QE3 by September and gold will move substantially higher.”

Speculators raised their net long positions in U.S. gold futures and options to the highest levels since the beginning of May during the week ending Aug. 21, the U.S. Commodities Futures Trading Commission said.

"We believe September will be a key month for gold prices," Barclays analyst Suki Cooper said in a report.

(Sources:  “Gold steady near 4-month high, focus on central banks,” Reuters, August 28, 2012; “Gold Set For Best Year Since 2010 As Stimulus Bets Increase,” Bloomberg, August 27, 2012;  “PRECIOUS-Gold hits 4-1/2 month high on Fed stimulus hopes,” Reuters, August 27, 2012;  “PRECIOUS-Gold hits 4-1/2 month high on Fed stimulus hopes (2),” Reuters, August 27, 2012; “PRECIOUS METALS: Gold Rises in Asia on Hopes of Fed Stimulus Measures,” Wall Street Journal, August 27, 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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