[miningmx.com] – THE widely anticipated decision by the Federal
Reserve to provide support to economic recovery by introducing more liquidity into
the US market has provided gold with upwards price momentum, with investors
buying gold as a hedge against inflation.
The gold price rose to a six-month high on Friday (September 14), extending a 2%
rally from the previous session. Other precious metals also benefited although in the
case of platinum, the impetus was provided by fears of continued supply disruptions
as strike action racked dominant market player South Africa.
Spot gold climbed as high as $1,774.96 an ounce in early Asian trade, its highest since
February 29, and eased slightly to $1,772.99/oz by the early hours of today in Asian
markets.
The most active US gold futures contract also hit a near six-month high, at
$1,777.5/oz, before edging back to $1,775.70/oz.
As expected, the Federal Reserve chief Ben Bernanke launched an open-ended debt-
buying programme and promised to keep interest rates near zero until at least mid-
2015.
As a result, cash gold was on course for a 2.1% gain this week, the fourth week of
consecutive rises, as investors have been encouraged by central banks’ latest push to
promote global growth, Reuters reported. Bond-buying, effectively cash printing,
raises the inflation outlook and increases gold’s appeal as a hedge against rising
prices, Reuters said.
“The Fed’s move will flood the market with liquidity, which will consequently push up
inflation and drive investors to assets known to be good hedges, such as gold and
silver,’ Li Ning, an analyst at Shanghai CIFCO Futures, told the newswire.
“At least in the short- to medium-term, the Fed’s action will provide solid support for
gold and help it test $1,800 or even $1,900.’
Holdings of SPDR Gold Trust, the world’s biggest gold-backed exchange-traded fund,
inched up 0.2% on the day to 1,292.432 tonnes by September 13, Reuters said.
