FM: US GOLD OPEN - Comex gold steady on Japanese easing
New York 19/09/2012 - Gold futures held near $1,770 in the US on Wednesday after the Bank of Japan boosted its stimulus programme and a US Federal Reserve official said that QE3 could continue even when inflation creeps above two percent.
Gold for December delivery on the Comex division of the New York Mercantile Exchange was last down 80 cents at $1,770.50 per ounce. Trade has ranged from $1,767.40 to $1,781.80.
The Bank of Japan this morning announced that it will increase its asset buying and loan programme by 10 trillion yen ($127 billion). Central bank accommodation is generally viewed as supportive of gold because it devalues paper currencies and leads to future inflation.
Its move also comes on the heels of recent major monetary easing announcements by the US Federal Reserve and the European Central Bank.
“The Federal Reserve's stimulus measures last week had piled pressure on the Japanese central bank to follow suit with its own steps to support an economy feeling the pinch from a strong yen and the widening fallout from Europe's debt crisis,” Dennis Gartman, editor of the Gartman Letter, said.
Traders also continue to buzz over comments from Federal Reserve Bank of Chicago president Charles Evans, a noted dove, who yesterday gave a passionate defence of QE3 and reaffirmed the Fed's determination to reverse the current trend of low economic output and high unemployment.
The Federal Open Market Committee (FOMC) last Thursday announced it will make open-ended purchases of $40 billion worth of mortgage-backed securities (QE3) each month until there is sustained improvement in the labour market.
QE purchases will probably continue into 2013 to help push down the unemployment rate below seven percent, Evans said, even if inflation rises above the Fed's two-percent target.
“Combating unemployment has become more important to the Fed than price stability,” a US-based gold trader said. “Inflation certainly could blow out at some point down the road, making going long gold now imperative.”
Meanwhile, in wider markets, the euro fell by a third of a cent to 1.3014 against the dollar following reports that the German government is seeking to water down the proposed eurozone banking union by advocating for a supervisory authority where the larger states in region would have greater say in policy.
As for the more industrial commodities, light sweet crude (WTI) oil futures October delivery on Nymex were down 72 cents at $94.57 per barrel and the most actively traded Comex copper contract was at $3.8050 per pound, up 1.8 cents.
Comex silver for December delivery was last down 4.8 cents at $34.670 per ounce. Trade has ranged from $34.475 to $35.025.
Platinum futures for October delivery on Nymex were down another $6.80 at $1,629.50 per ounce, while the December palladium contract was at $670.80, up $3.40.
“The rise in the price of platinum could lose some of its dynamism in the near future as the strike at Lonmin’s Marikana mine complex (in South Africa) appears to be over. Overnight, the company agreed with striking workers that pay would be increased by up to 22 percent and that workers would receive a one-off lump sum,” Commerzbank AG said in a note.
“It could still take two weeks for production to be resumed, however. What is more, workers from other mines could be encouraged by the success of their Marikana colleagues to also demand much higher pay - so the latent risk of production outages in South Africa remains,” it added.
