Prices climb as much as $18 an ounce after U.S. Fed’s QE decision
By Myra P. Saefong, MarketWatch
TOKYO (MarketWatch) — Gold futures rebounded in electronic trading late Thursday morning in Tokyo, as a more than $19 loss in New York spurred bargain hunters in the wake of the U.S. Federal Reserve’s plan for more quantitative easing.
December gold (GCZ10 1,379, +41.80, +3.13%) was up $17.90 at $1,355.50 an ounce after tapping a high of $1,356.50. The contract had closed Wednesday in New York down $19.30, for a loss of 1.4%. See Wednesday’s metals column.
The Fed plans to buy up to $600 billion in long-term Treasurys until the end of June 2011, including about $75 billion this month, in a bid to boost the economy. See full story on the Fed’s decision.
The expected government spending will add fuel to the “inflation fire,” said Kevin Kerr, editor of Kerr Commodities Watch, so “gold is the safe harbor longer term.”
But the Fed announcement wasn’t the only support for gold prices.
There’s an increasing awareness among Asian investors and policy makers, in particular, that “the U.S. debt and money-printing policies are ‘out of control,’ as the Chinese commerce minister noted last week,” said Martin Hennecke, associate director at Tyche Group in Hong Kong.
“The avalanche of inflation and further [quantitative easing] in the future is highly unlikely to stop or even slow down, because the U.S. fiscal gap (total debt and futures unfunded liabilities) is estimated at $200 trillion, a shortfall that could only be met by expanding the money supply/money printing much further, to an extent where even hyperinflation could result,” he said.
