Gold May Gain for Third Day on Hedge Against USD, Low Rates
Source: Bloomberg, Nicholas Larkin and Glenys Sim (3/17/10)
"Gold prices are poised to exit their current phase of consolidation and regain bullish direction. . ."
Bullion futures rose the most in two weeks yesterday after the U.S. Federal Reserve pledged to keep its target rate "exceptionally low" for an "extended period." The dollar was little changed against the euro today after earlier slipping as much as 0.4% to a five-week low. Gold typically moves inversely to the greenback.
Gold prices "are poised to exit their current phase of consolidation and regain bullish direction as speculators and investors continue to diversify away from fiat currencies," James Moore, an analyst at TheBullionDesk.com in London, said in a report.
Gold futures for April delivery added $3.20, or 0.3%, to $1,125.70 an ounce at 8:24 a.m. on the Comex in New York. The metal gained 1.6% yesterday. Gold for immediate delivery in London was 0.1% lower at $1,126.55.
Bullion rose to $1,131.25 an ounce in the morning "fixing" in London, used by some mining companies to sell production, from $1,124.75 at yesterday's afternoon fixing.
The Fed yesterday left the federal funds rate target for overnight loans between banks in a range of zero to 0.25%, where it's been since December 2008. Gold climbed 24% last year as central banks maintained low interest rates and spent trillions to stimulate economies.
Bullion will trade at $1,390 an ounce in 12 months, Goldman Sachs Group Inc. said in a report. That compares with an estimate of $1,380 in a report last month.
"We expect the low U.S. real-interest-rate environment, combined with continued gold exchange-traded-fund buying and reduced central-bank sales will continue to provide strong support for gold prices in 2010 and 2011," Goldman analysts including Jeffrey Currie said in the report.