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Gold rallies as Feds QE signals power bullion bulls

Publish Date23/08/2012 09:09:51 AM

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Gold rallies as Feds QE signals power bullion bulls

Metals are on the rise with gold and silver surging higher alongside industrial metals that also flourished on the back of raised bets for more monetary easing to support growth. The FOMC minutes yesterday offered the needed trigger as the Feds rhetoric certainly turned more dovish and that supported bets for a new round of QE “fairly soon”.

Surely easing bets flow bullishly on the precious gold. The metal extended the gains into the European session this morning and trading at the highest in almost three months. In the European session as of 08:00 GMT gold is trading off highs at $1662.70 per ounce down from earlier intraday high set at $1666.85 per ounce but preserving the upside gains after starting the session at $1655.40 per ounce.

Gold extended the gain streak this week and heading to end Friday with strong gains. Bets for more policy support to revive growth is keeping the pressure on currencies and now the dollar which is favoring the gold for gains. The supported started early this week with bets the ECB will deliver promises and announce measures to contain surging borrowing costs and that was followed by Wednesday’s minutes that confirmed to the markets the probability of more QE as soon as next month.

The minutes of the meeting showed that the Fed is likely to announce more easing and a new round of stimulus “fairly soon” unless the economy improves considerably. The rhetoric is different indeed from the previous meetings and certainly more dovish and that gave the market the needed momentum to price more easing soon.

Gold was not the only winner of the easing bets. Silver also extended the gains and rallied above $30 per ounce.  Silver is currently hovering around $30.42 down from intraday highs today at $30.57 and off the early opening level at $29.85 per ounce.

The market is all about the Fed now and that is keeping the dollar short and supporting the gains. The downbeat HSBC Chinese PMI Manufacturing this morning also added to bets that China will follow suit and announce more easing alongside already circulating bets of policy action from Europe as leaders meeting. 

Eurogroup chief Juncker concluded his visit to Greece on Wednesday with some support to Greece signaling the available hope to indeed give the nation the extension to meet its budget targets that will ease the agony on the debt laden nation. The support comes ahead of the prominent Franco-German meeting today as Hollande heads to Germany to meet with Merkel and discuss surely the situation with Greece and the euro area debt crisis, considering bond purchases now is the hop topic in Europe!

With the gains we do not exclude market volatility today especially with the end of the week and covering ahead of another hectic week and rate decisions from Europe. For now the feds is enough support to power the metal for now and extend the gains with gold holding above $1600 psychological barrier. 

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