Gold prices were trading slightly higher as investors awaited the Federal Reserve’s potentially market-moving announcement Thursday, which could signal some form of quantitative easing.
Gold for December delivery was rising $1.70 to $1,735.40 an ounce at the Comex division of the New York Mercantile Exchange. The gold price traded as high as $1,738.50 and as low as $1,730.80 an ounce, while the spot price was rising $1.50, according to Kitco’s gold index.
“Any kind of further easing, be it another round of quantitative easing through QE3, would almost certainly be gold positive,” said Will Rhind, managing director of ETF Securities U.S. “Were it to materialize today I think we would see gold react positive, I don’t think it has been priced in fully.”
Gold prices have rallied since Fed Chairman Ben Bernanke said at the Jackson Hole, Wyo., economic summit that he was open to the idea of a fresh round of easing. The yellow metal leaped again last Friday when the U.S. monthly employment report came in weaker than expected. The number confirmed Bernanke’s grave concern of labor market softness, and investors fled to gold as a safe haven in anticipation that more easing could boost inflation in the long term.
Silver prices for December delivery were dipping 7 cents to $33.22 an ounce, while the U.S. dollar index was effectively flat at $79.71.
There are a number of scenarios that could unfold Thursday afternoon, with the most extreme option being a massive bond-buying and mortgage buying program from the Fed — similar to the monetary stimulus implemented after the 2008 financial crisis — or the opposite option of the central bank punting QE3 to its next meeting.
Rhind said that even with gold’s recent rally, another boost in the event of Fed action is unlikely to have already been priced in. What investors should watch are the details of the plan, if one is even presented Thursday.
“Obviously there’s going to be a quantum of the program: How long it’s going to go on for, the size and scope of it. So all of that is a variable that is unknown at the moment,” said Rhind. “We can look back to QEI and QEII and that did have a decent effect on the price after that was actually implemented.”
Gold mining stocks were mostly lower at the market opening on Thursday. Shares of NovaGold Resources (NG) were falling 3.1%, while AngloGold Ashanti (AU) was dipping 1.8%.
Among other mining stocks, Gold Fields (GFI) was down 1.1%.
SPDR Gold Trust (GLD) was down 0.18%, as iShares Gold Trust (IAU) fell 0.26%.
via The Street