The Federal Reserve’s dovish pledge to keep interest rates scraping along the bottom for another two years has sent the price of gold surging upwards.
Now at about $1,716 an ounce it is moving towards its 60 day high of $1747. It posted its biggest one-day gain for four months yesterday and still seems to be holding above the important psychological $1,700 level, if not edging higher.
But gold still has a way to go to equal its all time highs of about $1,900 an ounce.
There is also the prospect of further QE with the Federal Reserve ready to ‘pull the trigger’ reports CityWire.
Further stimulus by the Fed would encourage inflation as well as place doubt on the health of the US economy, so wary investors are already looking to hedge against it by buying into gold.
The Market Oracle, in its Gold Report, says that Fayyaz Alimohamed, CEO of Altair Ventures Inc. ‘….foresees a "mania" in junior mining stocks and recommends holding physical gold outside the banking system as a safety net’.
But senior analyst at Richcomm Global Services, Pradeep Unni, told Reuters that “Gold has also become increasingly vulnerable to external cataclysmic events that trigger abrupt changes when there are no apparent reasons for gold to perform that way. Such wild movements have reduced the peculiar attribute of gold as a hedge against equity market slides. This aims to point out that part of the rally in gold is also due to heightened investor optimism in global financial markets and any slide in equity markets may spill over to gold too.”