- MarketPulse - https://www.marketpulse.com -

Gold Seen Rising on Prospects for CBank Stimulus

Gold topped $1,700 an ounce for the first time since March on speculation that a sluggish global economy will force central bankers to add monetary stimulus, increasing demand for the metal as an inflation hedge.

The Institute for Supply Management said today that its U.S. factory index fell to 49.6 in August from 49.8 a month earlier. Economists in a Bloomberg survey projected a reading of 50, the dividing line between expansion and contraction. In the euro area, manufacturing slipped more than initially estimated in August, suggesting the economy may struggle to avoid a recession in the third quarter. Gold’s 4.5 percent rally in August was the biggest monthly gain since January.

“Bad economic news is good for gold,” Pratik Sharma, a fund manager at Miami-based Atyant Capital, said in a telephone interview. “People are getting additional confirmation that central banks are ready to unleash more stimulus measures.”

Gold futures for December delivery added 0.5 percent to $1,696.40 at 10:30 a.m. on the Comex in New York, after jumping to $1,701.60, the highest for a most-active contract since March 13. Floor trading was closed yesterday on the Comex for the Labor Day holiday.

Federal Reserve Chairman Ben S. Bernanke said Aug. 31 that the U.S. central bank will provide additional stimulus as needed. The European Central Bank may reveal details of a plan to buy bonds of debt-saddled nations when officials meet on Sept. 6.

Bullion surged 70 percent from the end of December 2008 to June 2011 as the Fed kept borrowing costs at a record low and bought $2.3 trillion of debt in two rounds of quantitative easing.

Silver futures for December delivery rose 2 percent to $32.085 an ounce on the Comex, after reaching $32.375, the highest since April 13.

Bloomberg [1]

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Dean Popplewell

Dean Popplewell [6]

Vice-President of Market Analysis at MarketPulse [7]
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
Dean Popplewell

Latest posts by Dean Popplewell (see all [6])