Wednesday, October 13, 2010

Gold surges as Fed releases September FOMC minutes

"In minutes of the its last policy-setting session held September 21, the Fed said officials discussed several approaches to aiding the economy but focused on buying additional longer-term Treasury securities and ways to nudge the public into expecting higher levels of inflation in the future," Reuters reports.

Guess what happened to the price of gold?

"Gold sets record as Fed easing hopes hit dollar" - Reuters

"Gold Prices Rise to Record as Demand Mounts for Alternative to Currencies" - Bloomberg
“Both gold and the dollar agree that Ben Bernanke will be victorious in his quest to foment a robust rate of inflation,” said Michael Pento, a senior economist at Euro Pacific Capital in New York. . . .
Gold for immediate delivery reached a record $1,374.35.
Investors should be prepared for a correction in prices, Adam Sieminski, a Deutsche Bank analyst, said in a report. The 14-day relative-strength index for gold futures has been above 70 for the past three weeks, a signal to some traders that prices may decline.

Investors ‘Wary’

“Investors need to be wary of a short-term correction in the U.S. dollar during October, and with it, a possible setback to recent price advances” in gold, Sieminski said. “We view any correction in gold prices over the next three weeks as yet another buying opportunity. The next hazard for bullish gold investors will be the first four weeks of next year, which has seen the dollar strengthen nine out of the last 12 years.”  [Emphasis added]

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