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PRECIOUS-Gold jumps 2 pct as Fed stimulus fans inflation fears
September 13, 2012 / 10:16 AM / 5 years ago

PRECIOUS-Gold jumps 2 pct as Fed stimulus fans inflation fears

* Gold hits six-month high as precious metals rally
    * Fed focus fans inflation fears
    * US gold futures volume set for highest since late July
    * Some doubt efficacy of another round of QE
    * Coming up: U.S. consumer prices Friday

 (Recasts, adds comment, updates market activity)
    By Frank Tang
    NEW YORK, Sept 13 (Reuters) - Gold surged 2 percent on
Thursday, approaching its high for the year after the Federal
Reserve launched another aggressive, bullion-friendly economic
stimulus program.
    The metal received a strong vote of confidence after the
U.S. central bank said it would buy $40 billion of
mortgage-backed debt each month until the U.S. jobs outlook
improved substantially, as long as inflation remained contained.
 
    Market watchers said the Fed's unprecedented step was
essentially shifting its focus to employment from price
stability, a move that was seen as very bullish for gold, a
traditional inflation-hedge . 
    "They are emphasizing the growth mandate, and that means
they don't care about inflation other than giving lip service to
it," said Axel Merk, chief investment officer at Merk Funds,
which has $600 million in currency mutual-fund assets.
    "The price of gold will do very well in the years to come,"
Merk said.
    Spot gold was bid at $1,765.40 an ounce as of 3:08
p.m. EDT (1758 GMT) after hitting a high of $1,772.26, within
striking distance of a 2012 high of $1,790 set on Feb. 29. 
    U.S. COMEX gold futures for December delivery settled
up $38.40 at $1,772.10 an ounce, with trading volume poised to
hit its highest level since late July and 40 percent above its
250-day average, preliminary Reuters data showed.
    The flow of COMEX gold options indicated that bullion could
rally further as investors scramble to buy back their previously
bearish bets after the Fed announcement, said COMEX gold option
floor trader Jonathan Jossen.
    Silver, which tends to be more speculative and
volatile than gold, rallied 3.7 percent to $34.50 an ounce. 
    The Fed said the new round of bond-buying was open-ended and
that it would not likely raise interest rates from current
rock-bottom lows until at least mid-2015. Previously, it had set
such guidance at late 2014.
    "The Fed's inflationary behavior should be bearish for the
dollar in the long run and drive investors to seek protection
via the gold market," said Jeffrey Sherman, commodities
portfolio manager of DoubleLine Capital, which has more than $40
billion in assets.

    QE EFFICACY DOUBTFUL
    However, some question the efficacy of the Fed's monetary
action. Reuters data shows that asset performance tended to
diminish with each new round of QE, and it sometimes takes as
long as a year for the effects of Fed action to kick in.
    
 
    
    Year-to-date, gold is up 13 percent following a 10 percent
rally since the start of August as central banks around the
world appear more determined to take up further stimulus to aid
a frail global economy.
    That is still below the 15 percent gain seen early this year
after the Fed said in January that it would keep interest rates
near zero through late 2014. Doubts about additional
quantitative easing (QE), or printing money to buy government
bonds, had decreased bullion's appeal as an inflation hedge.
    Phillip Streible, senior commodities broker at futures
brokerage R.J. O'Brien, said that gold's price outlook could
still disappoint as the magnitude of the new Fed stimulus was
smaller than the market had expected.
    Among other precious metals, spot platinum rose 2.7
percent to $1,679.99 an ounce, while spot palladium 
climbed 1.9 percent to $683.82.
    
 3:08 PM EDT     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold DEC   1772.10  38.40   2.2  1720.00 1775.00  231,997
 US Silver DEC  34.778  1.486   4.5   32.720  34.870   81,885
 US Plat OCT   1679.50  29.90   1.8  1639.00 1691.40   17,280
 US Pall DEC    689.00   9.70   1.4   675.25  695.45    3,890
                                                               
 Gold          1765.40  34.40   2.0  1717.86 1772.26         
 Silver         34.500  1.230   3.7   32.710  34.780
 Platinum      1679.99  43.79   2.7  1642.00 1686.24
 Palladium      683.82  12.82   1.9   678.52  692.50
                                                               
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold        251,510   132,587   182,607     19.59   -0.09
 US Silver       88,690    53,434    53,236     35.32    2.83
 US Platinum     21,149    16,069     9,256     22.33    1.31
 US Palladium     3,909     7,812     4,649                  
                                                               
    

 (Additional reporting by Veronica Brown and Amanda Cooper in
London, and Rujun Shen in Singapore; Editing by Dale Hudson and
Jim Marshall)

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