Gold holds steady ahead of JH meet

Gold prices edged higher in Europe on Thursday, but were kept in a narrow range by uncertainty over how far the Federal Reserve will satisfy market speculation that it is set to unveil another round of measures to stimulate the U.S. economy.

A speech by Fed chairman Ben Bernanke at a central bankers’ symposium in Jackson Hole, Wyoming, on Friday will provide clues on the chances of the Fed embarking on another asset buying program, known as quantitative easing.

The metal has climbed more than 2 percent since minutes of the Fed’s last meeting, released on Aug 22, suggested the bank may be set to launch a third round of QE to boost growth.

Further monetary easing would maintain pressure on long-term interest rates, boost liquidity, undermine the dollar and stoke fears over the inflation outlook further down the road. All these factors are positive for gold.

“On gold we are very much into a wait-and-see approach,” Saxo Bank analyst Ole Hansen said. “(There was) a bit of profit taking yesterday, but considering the move higher last week it is holding up very well, with investors reluctant to let go.”

“As long we can hold $1,630 support on any pull-back, the technical outlook looks pretty good,” he added.

“We think the most likely outcome tomorrow will be an extension of the very low interest rates until 2015.” While this could initially disappoint, he said, the reiteration of a low interest rate policy will be supportive overall.

Spot gold was up 0.1 percent at $1,657.14 an ounce at 1141 GMT, while U.S. gold futures for December delivery were down $2.90 an ounce at $1,660.10.


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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell