2012-02-01

Fed wants gold to go higher

The gold price resumed its climb in 2012 Tuesday morning, advancing $15.00 to $1,744 per ounce. Gold price are hovering at seven-week highs and have now appreciated 12% in January and are off to their best start since 1980.  TD Securities analyst team highlighted the strong demand for gold bullion exchange-traded funds.  In a note this morning, TD Global Precious Metals commented,  “Underpinning the recent rally in gold is the notable rise in ETF holdings…last week saw an impressive addition of 0.73 million ounces, the largest weekly increase since November and taking us to within 1% of all time high numbers seen in December.”

The Federal Reserve “really wants to trash the dollar,” according to Jim Rickards, author of acclaimed book Currency Wars: The Making of the Next Global Crisis. In an interview with King World News, Rickards discussed his outlook for gold and the greenback in light of last week’s Fed meeting.  ”Contrary to what a lot of people think, the Fed wants gold to go higher,” he contended.  ”They just want it to go up in a controlled way, they don’t want to see a super-spike.  We may get a super-spike anyway just because of panic buying.”
At last week’s post-FOMC press conference, “Bernanke made it crystal clear they were going to go to some kind of quantitative easing,” Rickards added.  ”One of the reporters asked, ‘Do you worry that inflation may get out of control?’  The Chairman (Bernanke) responded, ‘We’re targeting 2% inflation.’  Of course, I don’t believe that.  My belief is they are targeting something like 4% or 5%.”

As for the implications of the debt crisis on the broader markets, Credit Suisse analyst Tom Kendall commented that “Until we until we get some kind of resolution in these discussions on Greek debt and what the bondholders are going to accept as a haircut, then that is still going to be a live issue for the market.”
However, Kendall appeared more constructive on the implications for the gold price. “If the perception of risk related to that increases, then you’ll probably see an acceleration of the flow of cash out of peripheral European countries and some of that will undoubtedly make its way into gold.”

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