Enthusiasm For Gold Building Again
July 31, 2012
By James O'Dell
July 31, 2012, Los Angeles – The price of Gold is higher at $1,625.20 an ounce on Tuesday morning after easing a modest 0.12 percent or $2.00 on Monday, to close at $1,621.30 an ounce, as investors remain sidelined, yet hopeful, the central bank's FOMC meeting, beginning later today, will deliver fresh stimulus to boost the stumbling economy, and reduce unemployment. The price of Silver rallied 1.55 percent or $0.43 to close at $28.16 an ounce, while the Gold/Silver ratio fell to 57.57, as Silver outperformed Gold.
If the Fed opts to launch additional quantitative easing at this meeting, the inflation outlook would certainly rise, driving investors to buy physical Gold and Silver to hedge against the resultant rise in prices. Many analysts doubt the Fed will announce easing at this meeting, deciding instead to hold off until September. With enthusiasm for Gold building again, analysts at UBS, in a note to clients, wrote that “Right now, it’s clear that sentiment is clearly turning in Gold’s favor. But it’s also clear that despite last week’s inflow of fresh longs, some hesitancy abounds.”
Investors have been hesitant to take a position without a clear picture of the central bank's stance on future stimulus which should clear up after this meeting. “A much bigger pool of investors, while starting to pay attention to Gold again, are biding their time before getting long,” said UBS, adding that ”Investors are playing the waiting game, looking for the signal to get back in.”
Meanwhile, the ECB meets Thursday, just one week after its President, Mario Draghi, promised that the central bank would do "whatever it takes" to preserve the euro, within its restrictive mandate. “Believe me, it will be enough,” he reassured his audience. The challenge now will be for the ECB to keep the pressure up on governments to resolve the crisis, without disappointing the financial markets. "Whether they pull the trigger on Thursday or a few days later isn't as important as sending a clear signal [to markets] that they're ready to start buying bonds again," said Jacques Cailloux, of Nomura International.
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