Gold at 6-month high as Fed fans inflation risk
Singapore, September 14, 2012
Gold rose to a six-month high on Friday, extending a 2-percent rally from the previous session when the Federal Reserve announced a new round of stimulus measure, which could add to the risk of inflation down the line and enhances gold's appeal.
Other precious metals widely used in industrial applications also climbed to their highest in about six months, encouraged by a boost of risk appetite after the Fed launched an open-ended debt buying programme and pledged to keep interest rates near zero until at least mid-2015.
Cash gold is on course for a 2.1-percent gain this week -- a fourth week of consecutive rises, as investors have been encouraged by central banks' latest push to promote global growth.
Bond-buying, effectively cash printing, raises the inflation outlook and increases gold's appeal as a hedge against rising prices.
"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," said Li Ning, an analyst at Shanghai CIFCO Futures.
"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."
Spot gold climbed as high as $1,774.96 an ounce in early Asian trade, its highest since Feb. 29, and eased slightly to $1,772.99 by 0411 GMT.
The most-active US gold futures contract also hit a near six-month high, at $1,777.5, before edging back to $1,775.70.
Technical analysis echoed the bullish sentiment in the market. Spot gold could rise to $1,785-$1796 range during the day, said Reuters market analyst Wang Tao.
Silver rallied to a six-month high of $34.92 an ounce earlier, before easing to $34.75. It was headed for a 3.2-percent weekly rise, extending a winning streak to a fourth week.
"Silver is poised to test the next resistance level at $35.4," said a Shanghai-based trader, "The sentiment remains bullish, as many investors are just entering the market after confirmation of the QE3 overnight." - Reuters