Gold Rises on Speculation Renewed Inflation Will Spur Demand
(Bloomberg) — Gold rose for a second day on speculation that the Federal Reserve will spur inflation by continuing to buy Treasury securities in a bid to revive the economy. Silver also advanced.
Analysts expect the Federal Reserve to keep a $300 billion program of buying Treasuries as a way to loosen credit by adding to the money supply. Fed policy makers are meeting today. Some investors buy gold as a hedge against inflation. The U.S. consumer price index has declined 2.7 percent since September, Labor Department data show.
“There’s a lot of anticipation to see whether the Fed is going to continue printing money,” Sagiv Peretz, a Finotec Trading U.K. senior dealer, said by telephone from London. “If they will do that, it might support gold because of expectations of inflation further down the road.”
Gold futures for August delivery rose $10.10, or 1.1 percent, to $934.40 an ounce on the New York Mercantile Exchange’s Comex division. The most-active contract advanced 0.4 percent yesterday.
Bullion for immediate delivery gained $8.52, or 0.9 percent, to $934.35 an ounce at 6:50 p.m. in London.
“What is it about the U.S. dollar that has ‘prevented’ the materialization of fresh all-time highs in bullion?” Jon Nadler, an analyst at Kitco Metals Inc. in Montreal, said in an e-mail. “The rather banal explanation is the fact that the world is lacking for better alternatives.”
The Fed probably will keep its interest-rate target for overnight loans between banks close to zero, according to a Bloomberg News survey of economists. The Fed cut the target lending rate to 0.25 percent to zero percent in December.
Dollar as Rudder
The dollar “will provide direction in coming sessions,” James Moore, an analyst at TheBullionDesk.com in London, said today in a note. “With the Fed expected to suggest it will keep rates very low for some time, we expect investors may again turn to stronger-performing assets such as commodities.”
Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, was unchanged at 1,131.24 metric tons as of yesterday, the company’s Web site showed.
The metal rose to $933.50 an ounce in the afternoon “fixing” in London, the price used by some mining companies to sell their output, from $928.75 this morning.
Silver for July delivery climbed 6.6 cents, or 0.5 percent, to $13.942 an ounce in New York. Silver for immediate delivery gained 5.25 cents, or 0.4 percent, to $13.9025 an ounce at 6:51 p.m. in London.
Categorised as: Gold News