Gold Rises Further as Fed Extends QE

2010-AUG-13

From the GoldMoney News Desk --

Concerns over the US economy were re-ignited this week after the US Federal Reserve (Fed) announced further quantitative easing (QE). On Tuesday evening the Fed kept interest rates at the record low of 0-0.25%, but what the markets were really interested in was the extension of QE. In the accompanying statement the Fed announced that it would use cash from maturing mortgage bonds to buy government debt. Up until recently policy makers have been discussing the timing of pulling out of QE, so naturally this news has reminded people that the US economy is not out of the woods yet.

The Fed extending QE would usually be supportive for gold, but gains were initially capped as the dollar rose. As the week progressed, however, the strong dollar was no longer enough to keep gold down as weaker than expected US unemployment data was announced. This further boosted gold's safe haven appeal and early on Friday gold rose to a 4-week high of $1,217/oz.

Many analysts now expect the gold price to stabilize higher as we are moving towards a seasonally strong period. In September and October traders become more active after the quiet summer period and the Indian festivals begin in late August, making it a traditionally positive time for gold. Analysts say that during these months the price has risen an average of about 15% in the past ten years.

The gold/silver ratio moved up to 67 this week as silver's industrial uses dragged it down. Silver fell to under $18.00/oz on Wednesday, on the back of fears over macro economic recovery, but it did manage to rally slightly into Friday up at around $18.15.

The PGMs (platinum group metals) were down this week after renewed concerns over economic growth knocked expectations for car production. Platinum was trading at $1,535/oz on Friday morning against $1,563 at opening Monday. Palladium was at $470/oz on Friday against $490 at the start of the week.

All data and quotes sourced from Reuters.