Gold Update: Traders Bullish on Monetary Easing

on Nov 2, 2012

On 2 November 2012, Bloomberg reported that gold traders were the most bullish in ten weeks, expecting prices to rise with central banks pledging to do more to spur economic growth. Gold, which was on track for a weekly gain after three weeks of losses, however, fell ahead of the release of US employment data, pressured by dollar gains.

**Traders Most Bullish in Ten Years**
Eighteen of 27 analysts surveyed by Bloomberg see gold rising next week, with a further four neutral, the highest proportion of bullish traders since the end of August. Traders see gold advancing with central banks having pledged more stimulus action to spur growth. “Central banks are all very concerned about a depression, so they’re keeping monetary policies as loose as possible,” noted Mark O’Byrne, the executive director of GoldCore Ltd, as quoted by Bloomberg. “People are buying gold as a store of value to protect against currency depreciation.”

On October 30, the Bank of Japan expanded its asset-buying programme by ¥11 trillion (£86 billion) to 66 trillion yen (£515 billion) for the second time in two months, whereas the US Federal Reserve indicated that it planned to continue with bond-buying.
**US Jobs Data, Presidential Election**
Gold prices, however, have slid for three consecutive weeks, their longest losing streak in more than a year, while keeping on track for an annual gain. Gold lost some ground on November 2, ahead of the US jobs data announcement, with positive expectations pushing the greenback up. “The stronger dollar is bringing down a number of markets including gold,” said Daniel Smith, analyst at Standard Chartered (LON:STAN), as quoted by Reuters. Mr Smith, however, added that positive US economic data could lead to a weaker dollar and higher gold prices.

!m[Positive US Jobs Data Likely To Weigh On The Precious Metal ](/uploads/story/713/thumbs/pic1_inline.png)“More surprising than not, we’ll see good numbers today, and generally that will be pro-risk – I think we’re going to see higher metals prices and higher gold on the back of that, because the dollar is likely to weaken,” noted Mr Smith, as quoted by Reuters. Positive US job numbers, however, are expected to weigh on gold, given that the Fed’s third round of quantitative easing, which has pushed gold up, is directly related to the health of the US job market.

With the US presidential elections approaching, Bloomberg quotes UBS (NYSE:UBS) analyst Edel Tully as saying that President Obama winning is likely to support gold price since “market uncertainty” will be removed. Ross Norman, CEO of Sharps Pixley, also sees an Obama victory as a positive development for gold because investors expect greater monetary accommodation and currency debasement from a Democratic administration.


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