Gold futures climbed to a five-month high, capping the largest monthly gain since January as investors bet that Federal Reserve chief Ben Bernanke’s defence of the central bank’s previous easy-money policies was a signal that more easing was ahead.
Monetary easing – effectively increasing the amount of cash in the financial system – can raise concerns about future inflation and the value of paper currencies and draw investors, looking for a hedge, to gold.
In a speech at the Fed’s annual symposium in Jackson Hole, Wyoming, Bernanke voiced support for the central bank’s previous monetary-easing measures, but didn’t specifically outline any new steps to boost the US economy.
Bernanke said the economic situation was “far from satisfactory,” supporting speculation that the central bank would deploy more accommodative policies, or another round of quantitative easing, in an effort to prop up growth.
Gold for December delivery, the most-actively traded contract, rose $US30.50, or 1.8 per cent, to settle at $US1,687.60 a troy ounce on the Comex division of the New York Mercantile Exchange, the highest settlement for the benchmark contract since March 13.
Futures had traded at $US1,660 before Bernanke’s speech.
In August, futures rose 4.5 per cent, the largest monthly gain since January, when futures gained 10.8 per cent.
“Chairman Bernanke provided a clear case and justification for past and future endeavours of quantitative easing,” said Jeffrey Wright, an analyst with Global Hunter Securities.
“We think the door is wide open for more quantitative easing in 2012.”
Silver climbed to a four-month high, with the December-delivery contract settling up 3.3 per cent at $US31.442 a troy ounce.
September may be a similarly volatile month. Some in the gold market now expect monetary easing across three continents, with a particular focus on the Fed, the European Central Bank, and the People’s Bank of China.
“The events on the calendar for early September are just critical” in determining whether gold’s rally will last, said Kurt Pfafflin, a senior broker with Daniels Trading.
Signs of improvement in the US labour market could alter the Fed’s easing calculus before the bank’s September 12-13 policy-making meeting, analysts said. The Labour Department’s closely watched reading on US unemployment is scheduled for release on September 7.
“The Fed continues to state that they’re going to focus on economic data, and frankly the economic data hasn’t warranted more easing” yet, said Dave Meger, director of metals trading with Vision Financial Markets.
Settlements (ranges include open-outcry and electronic trading):
London PM Gold Fix: $1,648.50; previous PM $1,660.50
Dec gold $1,687.60, up $30.50; Range $1,647.10-$1,688.30
Dec silver $31.442, up 99.6 cents; Range $30.295-$31.520
Oct platinum $1,537.30, up $33.60; Range $1,498.20-$1,538.50
Dec palladium $629.40, up $13.00; Range $604.50-$630.00
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