Gold, News & Features, Resource News
Gold jumps on Bernanke signals
By The Australian · February 3, 2012 · 4:07 am · Leave a Comment
Click here to read the whole story or read an excerpt below.
By Matt Day
GOLD futures gained this morning for the sixth time in seven sessions, settling at the highest level in 11 weeks as the Federal Reserve chief urged Congress to tackle the fiscal challenges facing the US.
Gold for April delivery, the most actively traded contract, rose $US9.80, or 0.6 per cent, to settle at $US1759.30 a troy ounce on the Comex division of the New York Mercantile Exchange, the highest settlement price since November 16.
In testimony before Congress overnight, Ben Bernanke cited the sovereign debt crisis in Europe in stressing the importance of addressing debt levels in the US. The Fed chairman also said the pace of US recovery was frustratingly slow, comments seen supporting the central bank’s easy money policy.
Gold has gained by 6 per cent since the central bank last week released a forecast short-term interest rates would remain low into 2014.
Low interest rates can increase investors’ appetite for gold by making the metal more attractive compared with interest-bearing assets. Some investors also buy gold to shield their wealth from the potential inflation such easy money policies can bring.
Mr Bernanke’s statements were supportive of “continued low interest rates and perhaps other stimulus”, said George Gero, vice president with RBC Capital Markets, in a note, enough to draw buyers to gold.
Gold’s gains came despite stability in the US dollar. A stronger US dollar can limit interest in US dollar-denominated gold by making the futures more expensive for potential buyers using other currencies.
Traders were still watching developments in Europe’s debt struggle, said Ira Epstein, director of the Ira Epstein division of the Linn Group. Signs of easing stress in the eurozone’s financial system have lifted the euro off its mid-January lows against the US dollar and propping up gold prices.
But Epstein cautioned the gold market’s momentum could slip, given the amount of uncertainty hovering above the global financial system.
“I certainly wouldn’t be chasing a $US200 rally in gold in this environment,” he said.
