2010-10-22

Precious metals continue to benefit from market expectations of quantitative easing

Precious metals continue to benefit from market expectations of quantitative easing. A US consultancy yesterday stated that they thought the Fed would be releasing $500bn over the next 6 months. This fuelled dollar weakness and brought gold within reach of the $1,350 mark. As highlighted yesterday, we believe that a gold price of $1,350 is consistent with $500bn of quantitative easing. Adding further impetus to the dollar’s fall were comments by German Chancellor Merkel that it was time to consider exit strategies.

Comments by US Treasury Secretary Geithner that the world’s major currencies are “roughly in alignment” saw the dollar surge briefly, prompting a slight pullback in precious metals in early trade. Soon, however, investors returned to precious metals as expectations over increased liquidity (Fed monetary easing) once again took hold.

Gold support is at $1,333 and $1,324. Resistance is at $1,351 and $1,359.

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