2012-08-17

Gold price is on pace to settle between $1,600 and $1,625 for the tenth consecutive trading day

The gold price continued to consolidate on Thursday amid yet another relatively quiet day for financial markets.  The spot price of gold held near unchanged at $1,605 per ounce despite modest weakness in the U.S. dollar.  With today’s tepid movement, the gold price is on pace to settle between $1,600 and $1,625 for the tenth consecutive trading day – suggesting that the dog days of summer have held true to form lately.

Still, many in the investment world believe that Ben Bernanke and his fellow central bankers will launch a third round of quantitative easing (QE3) in the months ahead because the U.S. economy remains in a rather fragile state.  Bayram Dincer, an analyst at LGT Capital Management, stated that “My general view is that for the time being major central banks will let go of the mandate of price stability in favour of spurring growth figures. This means that the central banks in an explicit or implicit inflation targeting regime will try to anchor inflation expectations around 3.0 percent.”
Given that an inflation rate of 3.0% is well below current levels and likely would require further stimulus and therefore more currency debasement, Dincer contended that “This change would be gold price supportive.”

Analysts at Credit Suisse echoed Dincer’s sentiment, noting in a recent report that “A downward surprise in U.S. inflation numbers is spurring hopes for more monetary stimulus, which would be positive” for the price of gold.

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