Futures Market News
Gold futures push toward $1.7k as stimulus remains in play
Aug 31, 2012 03:25 PM
The prospect of additional monetary stimulus prompted gold futures to spike higher in value on Friday, according to MarketWatch.
Though the precious metal's price initially fell after completion of the highly anticipated speech delivered by U.S. Federal Reserve chair Ben Bernanke, traders building gold positions in anticipation of a third round of monetary easing provided a jolt as bullion resumed its drive toward the milestone price of $1,700 per troy ounce.
Bernanke's speech at the annual symposium in Jackson Hole, Wyoming, initially dragged gold futures down since it did not explicitly say a third round of asset purchasing is imminent. But it did leave open that route for the fed to explore.
Authorities are likely to resume discussing the merits of stimulus programs, and with that third round of quantitative easing "on the back of people's minds, who wants to be short?" strategist Charles Nedoss with Kingsview Financial in Chicago asked MarketWatch.
At 2:26 p.m. on Friday, gold futures gained 1.9 percent, a $31.50 lift to $1,688.60 per troy ounce.
Spike prompts weekly, monthly gains
As the week and the month of August comes to a close, the precious metal is set to mark gains.
This week gold futures increased 0.6 percent and this month, gold futures climbed roughly 7 percent. The driver early during the week was the aftermath of minutes from the July 31/August 1 meeting of the Fed's policy-making arm, which indicated an interest in monetary stimulus.
As bullion pushes to return to the milestone price, a weak, underwhelming U.S. Department of Labor employment report next Friday is likely to help the commodity drive closer.
Fed chief endorses earlier spurring measures
Bernanke's speech noted support for the monetary stimulus programs employed by the central bank, according to The Wall Street Journal.
However, he did not explicitly note that the Fed is set to order another round. For that reason, gold initially fell in value before spiking higher.
He did note the U.S. economic tableau is less than satisfactory, which is in line with conjecture noting the central bank is likely to execute more such programs to spur the economy.
"Chairman Bernanke provided a clear case and justification for past and future endeavors of quantitative easing," analyst Jeffrey Wright with Global Hunter Securities told the news source. "We think the door is wide open for more quantitative easing in 2012."
Top price notched in four-plus months
In the aftermath of the Bernanke speech, the precious metal did drive to its highest value since April, Reuters reports.
His having noted that the reduction of unemployment was not moving quickly enough, for which the bank would advance the effort. That excerpt of the speech is considered open to stimulus measures.
Following suit with gold's performance were U.S. commodities and equities while the value of the world's reserve currency lost value.
"The main catalyst for the reversal in gold has been that Bernanke used the words 'grave concern' and the interpretation is that there's going to be more QE if he's using such dire projection for the economy," chief investment officer Jeffrey Sica with SICA Wealth Management told Reuters. "The stagnation of the labor market in particular is a grave concern ... because persistently high levels of unemployment will wreak structural damage on our economy that could last for many years."
Milestones await
The all-time record high price for gold futures is $1,923.70 per troy ounce as established on September 7, 2011, just short of one year ago.
Bullion also is pushing toward a 12th consecutive year of annual gains.
Many analysts believe the price of gold is poised to continue spiking higher yet again as it typically does around this time of year.
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